The Estate Tax, or Death Tax, depending on what political circle you run in, is one of the more divisive economic topics in our political debate. Is it good or bad for individuals and the economy? Is it fair to families and estates? Let’s dive into what the Estate Tax is in its current for and see what the arguments for and against repealing it are without the divisive political rhetoric that surrounds the topic.
What is the Estate Tax in Its Current Form?
Basically the Estate Tax is just what it sounds like, a tax on an estate when transferred from the deceased to their heir or designee; but it is more complicated in practice. Currently, estates of $5,540,000 per individual and $10,000,000 per married couple are eligible to be taxed according to the US tax code. It gets far more complicated as you dive into the tax code, but in its basic form, it is a tax on the transfer of property and assets after death of an individual.
History of the Estate Tax
The Estate tax finds it roots in the United States in 1919 along with the enactment of the national income tax. Since its inception, the Estate Tax has represented about 1% of the national revenue from taxes. The debate around the Estate Tax took its current form in the early 1990s when conservatives began to argue that the tax has a negative impact on wealth creation and entrepreneurship.
Arguments for Estate Tax Repeal
According to the Heritage Foundation, a conservative leaning think tank, there are a few reasons to support the repeal of the estate tax.
- First, the repeal of the estate tax would positively impact investment and personal savings. They say that people subject to the tax would spend less and save more if their estate was not subject to an additional tax after death.
- Second, the estate tax reduces wealth creation, job creation, and wage growth through driving down expansion and reinvestment to make businesses and individuals more profitable.
- Third, the estate tax hurt women and minority owned business and families. The estate tax puts an undue burden on new wealth and new businesses and stunts upward economic mobility for minority business owners, not allowing them to fully realize the American Dream.
- Finally, the Estate Tax punishes smart saving, investment, and frugality.
Arguments for Keeping the Estate Tax Intact
- The Estate Tax affects a very small percentage of transferable estates. According to the IRS, only 5,000 estates out of 2.9 million deaths were subject to the Estate Tax. This is less than .02% of estates in 2013.
- The Estate Tax stimulates charitable giving. The individuals subject to this tax are more likely to give to charitable cause in greater amounts to reduce their tax burden.
- Repeal of the Estate Tax would increase plutocratic tendencies and decreases opportunities to rise from the bottom to a higher economic class by keeping the majority of untaxed wealth in the hands of the few.
- The top 1% of the wealthiest earners have inherited substantial amounts of wealth while the conditions of the average worker has gone further into debt and instability.
The arguments for and against the Estate Tax may seem more reasonable depending on your financial wellbeing, but whatever happens, it is important to cut through the political rhetoric before you make up your mind. The fate of the Estate Tax is very much up in the air in Washington, which is why it is vital that when you are planning your estate, you find a reliable, experienced, and qualified tax Attorney. At Burkhalter & Burkhalter, we strive to make your estate planning as easy and complete as possible. We have helped many clients with complicated tax questions in Maryville and throughout Tennessee. As both a tax attorney and an accountant, he has experience with the most difficult tax issues and will do everything possible to keep your tax bill low. To learn more about how our office can help with your tax issues, contact Burkhalter & Associates right away for a free consultation.