NCPA - National Center for Policy Analysis

U.S. Death Tax High By International Standards

June 28, 1999

According to the Federal Reserve, household wealth in the U.S. has doubled in the last 10 years from $21.5 trillion in 1988 to $43.2 trillion in 1998. Since the population has only risen about 10 percent, wealth per capita has increased enormously. Even those with modest incomes can expect to have $1 million or more at retirement if they save early and invest aggressively. That is why the estate tax will be an issue of contention for years to come.

The estate tax applies to assets of $650,000 or more at death. This figure is scheduled to rise to $1 million in 2006, a rate of increase that barely keeps up with inflation. Although the lowest estate tax rate is 18 percent, because the exemption is in the form of a tax credit those with estates larger than $650,000 will pay 37 percent of each additional dollar in taxes.

  • At 55 percent, the top estate tax rate in the U.S. is among the highest in the world.
  • Among major countries only Japan has a higher top rate, according to the American Council for Capital Formation, and it applies to estates of more than $15.3 million, whereas the top U.S. rate hits at just $3 million of assets.
  • Many countries with leftist governments have lower estate tax rates; for example: Sweden, 30 percent; Denmark, 15 percent; and Canada, no estate tax at all.

Although Canada taxes capital gains at death, which the U.S. does not, the top capital gains rate there is still well below our top estate tax rate.

Increasing numbers of Americans are falling into the estate tax net -- a region once reserved for the truly wealthy. If the tax should remain, that is what it should once again become.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, June 28, 1999.


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