“. . . it is not by privileges alone, nor by birth, but by landed property handed down from generation to generation, that an aristocracy is constituted.”
– Alexis de Tocqueville
Estate Tax Basics
Only estates over $5.5 Million
The federal estate tax is levied on an individual’s estate worth more than $5.49 million or $10.98 million for a married couple’s estate. Estates worth less than those amounts pay nothing.
Fixed rate: 40%
The current estate tax rate is fixed at 40%. Because of the high exemption level, those few estates that face the estate tax pay an effective rate of just 16.6% on average, according to the Urban-Brookings Tax Policy Center.
The richest 0.2%
The estate tax is paid by just the wealthiest 0.2% of estates in the country, fewer than 2 out of 1,000 estates, roughly 4,700 estates in any given year, according to Congress’s Joint Committee on Taxation.
A tax cut averaging $3 Million
Taxable estates in 2016 would get a tax cut averaging more than $3 million apiece, based on an analysis of JCT data by the Center on Budget and Policy Priorities. The 318 estates worth at least $50 million would get tax windfalls of more than $20 million each, on average.
Few businesses affected
Despite wild claims made by opponents of the estate tax, about 20 small business and small farm estates in the entire country owed any federal estate tax in 2013.
The estate tax has been in the tax code in its current form since 1916. It has existed in one form or another dating back to our founding fathers, first appearing in our laws in 1797.
Many estates never taxed
On average, 55% of the value of estates worth more than $100 million is made up of unrealized capital gains that have never faced income or capital gains tax, according to Federal Reserve Board data. For estates worth between $5 million and $10 million, the unrealized capital gains that have never been taxed are 32% of the estate’s value. If the estate tax were repealed, those capital gains would face no tax of any kind whatsoever.
The Bush Tax Cuts
The estate tax was drastically cut by the Economic Growth and Tax Reconciliation Act of 2001, commonly referred to as the Bush tax cuts. That legislation raised the estate tax exemption from $675,000 in 2001 to $3.5 million in 2009 and lowered the top rate from 55% in 2001 to 45% in 2009, and phased the tax out completely for one year, 2010.
Estate Tax Through History
Estate Tax Quotes
“Without the estate tax, you in effect have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on hereditary rather than merit.”
– Warren Buffett
“We should celebrate the estate tax as an economic opportunity recycling program, where previous generations made investments for us and now it’s our turn to pass on the gift. strengthening the estate tax is important to our democracy.”
– Bill Gates
About the estate tax: “The primary objective should be to put a constantly increasing burden on the inheritance of those swollen fortunes which it is certainly of benefit to this country to perpetuate.”
– President Theodore Roosevelt
“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.”
– President Franklin D. Roosevelt
Resources / White Papers
“Policy Basics: The Estate Tax,” Center on Budget and Policy Priorities, June 5, 2016. https://www.cbpp.org/research/policy-basics-the-estate-tax
“Happy Anniversary! The Estate Tax Turns 100,” The Wall Street Journal, April 29, 2016.
“The One-Hundredth Anniversary Of The Federal Estate Tax: It’s Time To Renew Our Vows,” Boston College Law Review. Paul Caron, May 26, 2016.