Impact on Estate Taxes

Sensible Tax Reform

The Impact of Sensible Tax Reform upon American Businesses

The Impact of Sensible Tax Reform upon American Families

The Impact of Sensible Tax Reform upon Social Security and Medicare Taxes

The Fair-and-Simple Tax on Very High Incomes

The Impact of Sensible Tax Reform upon Estate Taxes

A Federal Consumption Tax

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The Impact of Sensible Tax Reform upon Estate Taxes

Estate taxes are the most progressive taxes imposed by the federal government (that is, they fall much more heavily upon the wealthy than upon the poor). Despite the impression that most Americans have, as a result of a very aggressive and well-financed disinformation campaign, the estate tax is not an oppressive tax upon America or Americans. Less than 1% of estates pay any estate taxes at all. However, for estates which are subject to the tax, the marginal tax rate is 45%. That is unreasonable.

The estate tax has been jerry-rigged in such a convoluted fashion that it is too progressive—it is unfair to the rich. The rules are so incomprehensible and conflicting that planning for estates is incredibly complicated. Also, they tend to favor very large estates over smaller taxable estates. That is also unfair. A fair tax system simply and clearly treats all taxpayers the same. The system should automatically provide all taxpayers the most reasonable protection of the tax law. That fairness and reasonableness does not exist under our present estate-tax system.

Sensible Tax Reform removes the entire tax burden from the estate. The inheritors, not the estate, will pay the tax--an inheritance tax, not an estate tax.

• The estate will receive a $2.5 million exemption plus unlimited charitable deductions (that is, both will be excluded from all federal taxes).
• The remaining inheritance will be distributed as defined in the will and added to each inheritor’s total income. It then benefits further from the $1 million annual income-tax exclusion.
• The remaining income, the net taxable income, will be taxed at the appropriate marginal income-tax rate: 15%, 25% or 35%.

The net impact will be a very significant reduction in the taxation of most bequests compared to today’s estate-tax system--inheritors will receive more income. The system will also be much simpler and fairer.