Tortuous Schedule for Death Tax Reductions
March 20, 2002
The phased reduction in death tax rates through the year 2010 has made a nightmare out of estate planning, critics charge.
Consider that this year the estate tax rate is 50 percent. Then it drops with excruciating slowness to 45 percent by 2007. Suddenly, in 2010 it expires altogether. And equally suddenly in 2011 it is scheduled to jump back to 55 percent, just as it was last year.
- Such a gradual reduction makes it incredibly difficult for the owners of small, private businesses to plan for an orderly transfer of ownership to the next generation.
- If a business owner who is about to die around the end of the decade fails to do so by December 31, 2010, his heirs lose out.
- Most of the estate will go to the government -- making it highly probable that the business he or she has worked so hard to build will have to be liquidated.
- The tax has never been a major source of revenue for the government -- contributing only about $28 billion in 2000.
In fact, one study shows that within 8 years of repealing the tax the gross domestic product would be $80 billion larger and would create 250,000 new tax-paying jobs, offsetting any tax revenue losses.
Many Americans are looking to President Bush to ditch this weird arrangement by killing the death tax forever. In fact, polls show that nearly 80 percent of Americans favor such a move.
Source: Editorial, "Pull the Tax Trigger," Wall Street Journal; and Newt Gingrich, "Time to Kill the Death Tax? Ex-Speaker Gingrich Says Yes," Investor's Business Daily; both March 20, 2002.
Browse more articles on Tax and Spending Issues