Currently, the amount of wealth that can be exempted from the estate tax is $2 million per individual, while married couples can pass on $4 million tax free. As a result, less than two percent of all estates own any tax. Under current law, the estate tax is set to be eliminated in 2010, only to return in 2011 when Bush’s tax changes expire. In 2011, the federal estate tax will revert back to being assessed on property valued in excess of $1 million.
We propose setting the exemption and marginal tax rates at the 2007 levels, indexing the exemption for inflation, and making the law permanent, since financial planning should not be a guessing game about tax code. Under this reform, only a tiny fraction of estates would be subject to the tax, and the vast majority of small businesses and family farms would be exempt from the tax. We retain the estate tax as part of an overall more fair tax code that ensures income from wealth is taxed.
For more on the Center’s policies on tax reform, please see: