Estate tax hits only 0.2% of estates
Tax-cut advocates try to scare ordinary Americans into supporting elimination of the estate tax by labeling it “the death tax” and pretending many Americans will have to pay it. They seldom present honest facts. The New York Times explains that the estate tax hits only the wealthiest of wealthy Americans and is far more fair than its critics claim:
The estate tax only [hits] couples with property worth more than $7 million, or individuals with property worth more than $3.5 million. That means 99.8 percent of estates will never — ever — pay a penny of estate tax.
The heirs of the remaining 0.2 percent of estates are who [Sen. Blanche] Lincoln (D-AR) and [Sen. Jon] Kyl (R-AZ) are so worried about. Their amendment would increase to $10 million the level at which the estate tax kicks in. It would also lower the top estate-tax rate to 35 percent from 45 percent…
In addition to creating the false impression that the estate tax eventually hits everyone — by mislabeling it a “death tax” — opponents routinely denounce the 45 percent top tax rate as confiscatory. In fact, the rate applies only to the portion of the estate that exceeds the exemption. As a result, even estates worth more than $20 million end up paying only about 20 percent in taxes.
Another misleading argument is that the estate tax represents double taxation. In truth, much of the wealth that is taxed at death has never been taxed before. That’s because such wealth is often accrued in the form of capital gains on stocks, real estate and other investments. Capital gains are not taxed until an asset is sold. Obviously, if someone dies owning an asset, he or she never sold it and thus never paid tax on the gain.
Posted by James on Friday, April 03, 2009