The current estate tax law, described above, is technically “permanent,” but that’s not really the case. In many cases, they’ve already paid tax on a large portion of their wealth and it does, indeed, seem unfair to tax it again simply because they’ve had the misfortune of dying. On the other hand, while some are lucky enough to be born into wealth, many “one-percenters” accumulated their wealth through hard work and innovation. And it does seem fair to try and collect that revenue from those who have benefited enough from our system that they can actually afford to pay those taxes, even if they don’t want to. Even massive cuts to government spending won’t change that. As a country, we are pretty broke and we need to raise revenue.
Truthfully, both sides have more than their fair share of good points. They also fervently argue that it is simply not right to impose a tax on one’s wealth simply because they have died, which led to the creation of a new term to describe the estate tax. Opponents of the estate tax argue that the tax is unfair, that it penalizes those who have worked the hardest or have been the most innovative, that have created the most jobs, and that have already contributed more in taxes than the rest of society. Many also believe that the estate tax helps to prevent a growing aristocracy, in which only a few well-off families control a disproportionate share of the nation’s wealth (though how effective the estate tax is at accomplishing this goal can certainly be questioned). Proponents argue that the tax only impacts those who have benefited from our country’s services, infrastructure and laws the most and have used that system to amass the greatest amounts of wealth.
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This effectively gives married couples the ability to pass up to $10.86 million to children or other non-spouse beneficiaries without any federal estate tax whatsoever.ĭespite both its longstanding inclusion as part of the tax code and the fact that it impacts less than two in every 1,000 Americans, the estate tax is often at the center of policy debates in Washington. Furthermore, since 2011, the estate tax exemption has been “portable” between spouses, meaning that a deceased spouse’s unused exemption can be transferred to a surviving spouse by timely filing an estate tax return. Today, that figure has grown to $5.43 million, meaning that up to $5.43 million can generally be passed to anyone without incurring a single dollar of federal estate tax. Most transfers to someone other than a spouse also avoid estate tax under current law.Īs part of the American Taxpayer Relief Act (ATRA) of 2012 – which was technically not signed into law until January 2013 – an inflation-adjusted exemption amount of $5 million was established. As has been the case since the early 1980s, spouses can generally leave an unlimited amount of assets to one another without such a transfer being subject to estate tax. Today, federal estate tax has become a non-issue for all but the wealthiest of American families. Surprisingly to many, it actually dates all the way back to 1916, making this the 100 th year the modern estate tax has been imposed in some manner (if you include 2010, when it was temporarily repealed for a year). Even the “modern” estate tax has been around much longer than most people realize.
In 1797, for instance, a temporary stamp tax was enacted that applied to bequests. Follow Me on Twitter: it or not, taxes related to an inheritance have been around, in one form or another, going back to the 1700s.
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