Estate tax

The estate tax (often referred to by opponents as the "death tax") is a tax levied on everything one owns or has a certain interest in at his/her date of death. Because the tax is effectively levied only on estates valued at over $1 million, it affects only the wealthiest 2% of Americans. Nevertheless, numerous attempts have been made in Congress to end, or severely cut, the estate tax. In the 110th Congress, several bills were filed to achieve this aim.

The estate tax is supported by many organizations, including United for a Fair Economy, as well as some of America's wealthiest citizens and philanthropists. They argue that [more on the arguments for the act].

Fair Tax Act of 2007
On January 4, 2007, Rep. John Linder (R-Ga.) introduced the Fair Tax Act of 2007 (H.R.25). The bill would abolish the Internal Revenue Service (IRS), repeal the federal income tax, enact a national sales tax to be administered primarily by the states, and lastly, repeal the estate tax. As of March 1, 2007, the bill had collected 56 cosponsors, and had been referred to the House Committee on Ways and Means.



Rep. Mario Diaz Balart (R-Fla.) bill
On January 11, 2007, Rep. Mario Diaz-Balart (R-Fla.) introduced a bill which would amend the Internal Revenue Code of 1986 to reduce the federal sales tax deduction, the child credit, and also repeal the estate tax. As of March 1, the bill had collected 49 cosponsors, and had been referred to the House Committee on Ways and Means.



Criticisms and commendations
A number of America's wealthiest citizens, including Microsoft founder Bill Gates, investment guru and Berkshire Hathaway founder Warren Buffett, and David Rockefeller Sr. all support the estate tax. They argue that the nation's wealthiest should donate their wealth to charitable causes--donations which largely bypass taxation and significantly benefit the public--rather than pass all of their wealth on to individuals and families. Some have argued that the existence of an estate tax encourages donations to charitable, philanthropic, and non-profit organizations. Responsible Wealth details a list of over 2,000 Americans among the top 5 percent of wealthiest Americans who, in spite of being subject to the estate tax, have signed a position in favor of it.

Some progressive groups argue that the estate tax is necessary to provide essential public services, and that it reinforces American conceptions of class mobility and earned wealth, as opposed to what United for a Fair Economy calls "European hereditary aristocracy and vast inequalities of wealth." Supporters of the estate tax cite President Franklin D. Roosevelt, who argued that:

"Great accumulations of wealth cannot be justified on the basis of personal and family security...Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our government"

According to United for a Fair Economy, the estate tax is America's "most progressive tax."

Repealing the estate tax would cost $1 trillion over the first decade of a repeal. Fair Economy suggests reforming rather than abolishing the estate tax. Their recommendations included:
 * A $3.5 million basic exception ($7 million for couples).
 * A 45% top rate.

United for a Fair Economy argues that such modifications would save $536 billion in revenue over ten years, which would be spent on:


 * A new educational trust fund to defray the high cost of college; a modern-day GI Bill for education.
 * Ensuring the long-term health of Social Security.
 * Creating a publicly-funded savings program for every American.
 * Other important initiatives that would assist in building wealth and opportunity for everyone."

External resources

 * Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth, by Michael Graetz and Ian Shapiro (Princeton University Press, 1995).
 * Estate tax reform and revenue projections
 * Estate tax rates 2002-2001

External articles

 * FairEconomy's Estate Tax Fact Sheet
 * Heritage Foundation: Time to Repeal Federal Death Taxes; The Nightmare of the American Dream
 * FairEconomy's Estate Tax Talking Points