The estate tax, also sometimes referred to as the "death" or "inheritance" tax, is levied upon individuals who leave a substantial bequest to their heirs. Currently, only those with assets of more than $1.5 million-about 1 percent of the population-will have to pay the tax. The first $1.5 million is tax free for individuals, and married couples can leave twice that tax free. Under current law, the tax-free amount (or "exemption") will rise to $3.5 million in 2009, before being fully repealed in 2010, and then returning in 2011 with a $1 million per couple exemption.
Although the tax applies to only a small percentage of Americans, many conservatives decry its supposed punishment of hard-working people who have managed to accumulate such wealth, particularly small business owners and farmers. Others argue that it is only fair to ask the very wealthiest to pay their share, that it maintains a vibrant American meritocracy, and that it is a source of much needed revenue for the government-repeal would cost about $1 trillion over the first 10 years of enactment.
However, if the repeal proponents get their way, the tax will be phased out altogether in 2010 and beyond.
Here is a sample of what Americans are saying about the estate tax:
Fort Collins, Colorado – Fort Collins Coloradoan
June 22, 2005 – Letters to the Editor
"I want an America where everyone has equal opportunity. Where elected officials work for everyone, not just for their wealthy campaign contributors. Where people get money by working for it. Where everyone pays their fair share of taxes, no more, no less.
"But Congresswoman Marilyn Musgrave, Sen. Wayne Allard, and other Republicans want a very different America. They're trying to repeal the estate tax, which is paid only when multi-millionaires and billionaires die. …
"That's an insult to every American who works hard and pays taxes on the money they earn. And we working Americans will have to pay higher taxes to make up for wealthy heirs who won't be paying theirs. How in the world can Musgrave and Allard possibly think this is fair?"
Pensacola, Florida – Pensacola News Journal
June 20, 2005 – Letters to the Editor
"I recently received a response letter from Rep. Jeff Miller stating why he proudly supported the repeal of the estate tax. He states that this tax will force small businesses and farmers to liquidate to pay the estate tax. This is inaccurate.
"Most family farms and small business owners do not meet estate tax eligibility.… The New York Times has reported that the American Farm Bureau could not cite a single case of a family farm lost due to the estate tax. Only the super wealthy, the richest 2 percent of Americans, are subject to the estate tax."
New York, New York – The New York Times
June 21, 2005 – Editorial
"This is not about saving mom-and-pop shops or the family farm, as President Bush and his allies would have you believe. Repealing the estate tax would cut taxes for the top 2 percent of Americans at an estimated cost of $745 billion during the first 10 years of repeal. That is more than the United States is projected to budget for homeland security.
"Another bad proposal is to shield owners of privately held family businesses from the estate tax, including some of the richest families in America.… The rationale is that unless they're protected, such families might have to sell some of the business's assets to pay the estate tax, imperiling the business. That's nonsense. Business owners have a responsibility to plan for the estate tax bill that will come due when they die, the same way a freelance consultant must set aside a chunk of his fees to avoid being caught flat-footed on April 15."
Wilkes Barre, Pennsylvania – Wilkes Barre Times Leader
June 19, 2005 – Letters to the Editor
"The first argument that the senator [Rick Santorum] makes is that the Federal Inheritance Tax is a 'double tax.' This emotionally appealing statement is erroneous, and can also be said of almost every tax. For example, sales tax could be said to be a 'double tax' because you pay income tax and then use the net income to buy goods upon which a sales tax is paid. …
"As to the remainder of the senator's 'arguments,' recent empirical studies have confirmed (see The Millionaire Next Door by researchers Thomas Stanley and William Danko) that lifetime and testamentary gifts are both a disincentive to work as well as a disincentive to save. Also, given this administration's proposed cuts to Medicaid in terms of long-term assisted care, the doing away with the Federal Inheritance Tax will allow the very wealthy to transfer nearly all of their property to their heirs while middle and low income people will lose their property paying for assisted care during their final days."
Roanoke, Virginia – Roanoke Times and World News
June 12, 2005 – Editorial
"A deeper principle is involved … a principle rooted firmly in the American experience, though challenged from time to time by the economic oligarchy, as now. No less a political philosopher and economist than John Stuart Mill – hardly a confiscatory Marxist – advocated 'death taxes' in the 19th century as a social and political safeguard against wealth inequality.…
"Such was the line of thinking that appealed to Republican presidents Theodore Roosevelt and William Howard Taft that led to passage of the estate tax in 1916. The tax has always been aimed at the accumulation of wealth by elite heirs, never at middle- or working-class Americans."
Philadelphia, Pennsylvania – Philadelphia Inquirer
June 8, 2005 – Letters to the Editor
"Values reportedly are important to members of Congress, and any important bill ultimately involves values. I believe the American values that support the continuation of the estate tax are equal opportunity, the work ethic, and the capitalist ideal of competition …
"The one value in favor of removing the estate (or inheritance) tax is economic; call it greed. I find it surprising that the 90 to 95 percent of the population that would lose with the end of the tax are not opposed to it. It is also interesting how many very rich people favor the tax, from Andrew Carnegie at the beginning to Bill Gates and Warren Buffet today."
Washington, D.c= – Washington Post
June 25, 2005 – Editorial
"You'd think Democrats would not only see through this sham but be eager to pick up the fight. After all, the question is whether, at a time when the gap between rich and poor is widening, extraordinarily wealthy Americans ought to be asked to give back some of what they've been able to amass. But instead of seizing on the estate tax fight as a defining issue, Democrats have scared themselves into thinking that they'll be punished for standing up against repeal.
"This is dumb politics and worse policy. Democrats should stop being so scared of the estate tax bogeyman. And centrist Republicans who claim to be concerned about mounting deficits can't reconcile those concerns with support for anything like the Kyl plan, which would drain almost as much revenue from the Treasury as doing away with the estate tax entirely. Those who say they don't support complete repeal shouldn't be fooled by the wolf-in-sheep's-clothing version."
For more information read our memo on the Repeal/Reform of the Estate Tax