Summary of the Estate Tax

A detailed Summary of Summary of the Estate Tax

The estate tax is a tax placed on the assets of a deceased person as the estate is passed to the heirs. This should not be construed as a tax on the heirs but a tax on the total holdings of the estate, both tangible and intangible. The gift tax and generation- skipping taxes are taxes developed by the government to reduce the loopholes that the estate tax created to ensure the taxation of all eligible estates. Since its inception, constituent opinion has been that the estate tax is essentially double taxation. People pay tax on their income throughout their lives, then upon their death the remaining assets are again taxed as their estate is passed to their heirs. In recent months Congress passed legislation that will repeal the federal estate, gift, and generation-skipping tax by the year 2010.

The repeal of the estate tax mainly affects only the country's wealthiest families, since these are the only families that pay the tax. For example, a little less than 2 percent of the people who died in 1997 faced an estate tax. Therefore, 98 out of every 100 estates of the people who died faced no estate tax. Before the repeal in 1999 eac

There is also a split view on the economics of the estate tax. The 23 billion dollars in revenue that the estate tax was accredited in 1998 was actually only 1.4 percent of the total revenue accumulated in that year. This level of revenue has remained relatively stable in the past five decades. Statistics show that the income taxes alone has accumulated more revenue in 1998 than the estate tax has in the past century. Overall the traditional estate tax analysis is probably inaccurate, due to the loss of income tax revenue from estate tax avoidance and the overall sensitivity of the economy.

The majority of the people who have estates that are eligible for the estate tax are well-educated people who are going to participate in estate tax avoidance. This avoidance of taxation results in a loss of tax revenue, which could have been collected via income taxes or property taxes. The overall health of the economy effects the revenue of the estate tax. In times of hardship the value of estates drop with the rest of the economy, this results in a loss of the estate tax base which results in a loss of revenue. Therefore the health of the economy in general has a direct effect on the estate tax revenue.

h member of a married couple was allowed a $625,000 exemption. This would allow a married couple a $1.25 million exemption from the estate tax. In 2000 this exemption rose to $675,000 per member, or $1.35 million per couple. This exemption is scheduled to continue to rise till the year 2006, when the exception will be $1 million per member, or $2 million per couple. Eventually, the total estate tax will be repealed in 2010, along with its' counterparts the gift and generation-skipping taxes.

Many tax analysts also believe that the estate tax hurts the economic growth of the economy. The tax accomplishes this in many ways. First, it adds another tax layer to a society that already pays multiple taxes. A person is taxed on the money they earn (income tax). They are taxed on the interest and dividend incomes they acquire from savings and investments. They are taxed on items that appreciate through capital gains tax. Finally, they are taxed on the estate that they pass to their heirs upon their death. The estate tax also hurts the economy by influencing people to invest in less profitable investments, so that they will not have to pay a hi

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Category: Politics