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Should we abolish the estate tax? Your estate is what you leave behind for your family or friends when you die. The estate tax is on the total amount you leave them. The tax rate charged increases with the size of the estate, just as the tax rates in the personal income tax increase with the amount of income a person earns. Also like the income tax, some of an estate is excluded from taxation. However, the exclusion in the case of the estate tax is much larger than for the personal income tax: in 2003 the exclusion was $1 million per person (there's one complication to this statement, related to the gift tax, but we will leave that out to keep things understandable). As a result of the large exclusion, less than 2% of estates pay the tax, whereas about 70% of all families and individuals pay the income tax. When President G. W. Bush took office in 2001, he had run on a platform that included the abolition of the estate tax. The phased elimination of the estate tax was included in the Economic Security and Recovery Act of 2001, one of the first big pieces of legislation passed after President Bush took office. A gradual rise in the proportion of an estate excluded from tax is one way the tax is being phased out. The exclusion was $675,000 in 2001; in 2006 it was $2 million. For 2010, the estate tax will be repealed. However, as things stand (in 2003), this will not be the end of the estate tax. It is scheduled to be reinstated in 2011! The bill was written in this way to lessen the long-term impact of the estate tax on the deficit and on the national debt. At the same time, most observers expect that Congress will find it hard, politically, to reinstate the estate tax once it is repealed. That brings us to the following questions Important Questions
Sources The Almanac of Policy Issues is a web site providing background information on important policy issues. The link below is to a sober, brief discussion of the estate tax, its pros and cons. It is an adaptation of a piece by Jane Gravelle, as tax specialist with the Congressional Research Service.:
The American Enterprise Institute for Public Policy research is "dedicated to…strengthening the foundations of freedom," including limited government and private enterprise. To find their work on the estate tax, click on the link below and search their site on "estate tax."
The Brookings Institution supports research and analysis on public policy issues. The first link below is to their home page. Go there and search on "estate tax" to find publications related to this project. The second link is a direct link to an article, "The Estate Tax is Down, But Not Out," by Leonard Burman and William Gale. The article is a publication of the Tax Policy Center, a joint enterprise of The Brookings Institution and the Urban Institute.
The Center on Budget and Policy Priorities is a respected research organization interested in fiscal policy and programs that affect the welfare of people with moderate incomes and less. The link below sends you to their home page. Once there, you can search on "estate tax" to find their publications relevant to this project.
Citizens for Tax Justice is "a public interest research and advocacy" group, one that focuses on making the tax system fairer for low and middle-income taxpayers. The link below is to their home page. Once you are there, search on "estate tax" to find materials they have written.
The Heritage Foundation does research and education. Its mission is "to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values." The first link is to their web site. Search on the word "estate" to find materials from them. The second link is to a memo advocating permanent repeal of the estate tax, by William Beach.
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