History of the Estate Tax
Some form of a federal "death tax" has been in existence since 1916. For an overview of the estate tax exemptions and rates that have been in effect since 1916 and what is scheduled to happen in 2013, refer to the following charts:
In 2001 the Bush administration enacted the Economic Growth and Tax Relief Reconciliation Act (EGTRRA for short), which led to a $2.5 million increase in the federal estate tax exemption, a 10% decrease in the estate tax rate, and then complete repeal of the federal estate tax effective January 1, 2010.
With that said, in December 2010 the Obama administration passed the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act (TRUIRJCA for short). This law reinstated the federal estate tax retroactively back to January 1, 2010, with a $5 million exemption and 35% tax rate. In 2012 the exemption has been indexed for inflation, resulting in the current $5.12 million exemption. But on January 1, 2013, the federal estate tax laws are scheduled to revert back the laws that were in effect in 2001/2002, which means that the estate tax exemption will be reduced back to $1 million and the tax rate will be increased to 55%.
Pros and Cons of Estate Tax Repeal
Ever since the enactment of EGTRRA and the more recent passage of TRUIRJCA, there has been much debate over the pros and cons of the federal estate tax. Those who favor repeal of the tax argue that the tax forces family businesses and family farms to be sold to pay the tax bill, encourages charitable gifts which are exempt from the tax, and/or inherited assets have already been taxed. Those who oppose repeal argue that the tax is necessary to provide funds to pay for the federal government, impose a tax on large unrealized gains, and/or redistribute wealth.
Back in December 2009 I posted a poll which asked those so inclined to share their opinion if they think the federal estate tax should be repealed, and the overwhelming majority of those who responded believe that the tax should be repealed. This is in line with a poll posted by Fox News back in December 2010 (on the same day that TRUIRJCA was signed into law by President Obama) which asked the question, "Should there even be an estate tax?" Over 79,500 people voted in that poll which resulted in 95% supporting estate tax repeal: Should We Even Have An Estate Tax? - Results.
Over the years I have informally polled clients and business contacts, including other attorneys, financial advisors and accountants, and again the overwhelming majority favor estate tax repeal. Aside from this, all of the 2012 Republican presidential candidates have said that they want to see the estate tax repealed.
On the other hand, back when President Obama was a presidential candidate, he supported a $3.5 million estate tax exemption and 45% tax rate, which were the numbers that went into effect for the 2009 tax year. And since becoming president, Obama has shown that he still supports these numbers by including them in his 2012 and 2013 budget proposals.
New Estate Tax Poll
Now that we are well into 2012 and in the midst of a presidential election year, I have decided to post the following simple question which only offers two simple answers - Yes or No:Should the federal estate tax be repealed?
I think its easy to predict that those who vote in the poll will choose "Yes," but as we have seen over the years, what the people want and what the people get are usually two different things.
After casting your vote, if you feel inclined to post your opinion about why you believe the estate tax should, or should not, be repealed, then please write down your thoughts by following this link: Readers Respond: Should the Federal Estate Tax Be Repealed?