Wednesday, October 29, 2008

New study on the estate tax

Nonpartisan Economic and Social Policy Research.

Back from the Grave
Revenue and Distributional Effects of Reforming the Federal Estate Tax
Leonard E. Burman, Katherine Lim, Jeff Rohaly

The estate tax is the most progressive component of the federal tax code. In 2000 even before substantial cuts were made, it applied only to two percent of wealthy decedents. Critics call it a “death tax” and say it is too complex, unfair, and a deterrent to savings and investment. Under Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax has been phasing out will disappear entirely in 2010 before being reinstated the following year in its pre-EGTRRA form. Congress has resisted repeated attempts to repeal the estate tax.

Both 2008 presidential candidates would scale back- but not eliminate- the estate tax which, as the law now stand will generate $490 billion through 2018. Senator McCain proposes to apply the 15% capital gains tax rate to estates worth more than $5 mil and Obama wants a 45% tax on estates worth more than 3.5 million. Obama’s plan would preserve around 60% of the current-law revenue and McCain’s would reduce revenues by about 4/5ths. Read the rest here.

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