A strong federal estate tax is a crucial to achieving greater economic and racial equality. The estate tax reduces concentrated wealth by ensuring that a portion of America's greatest fortunes are used to generate needed revenue to fund vital services, instead of being simply passed from generation to generation in predominantly white families.
What is the estate tax?
The estate tax is a tax on the transfer of assets at death. When someone dies, his or her assets (the "estate") are distributed to heirs. If the total value of the estate is larger than the tax-exempt amount (currently $5.25 million for individuals and $10.5 million for couples), an estate tax is imposed on everything above the exemption before the remaining assets are distributed. Any amount of an estate given to a spouse or charity is tax exempt.
Who pays the estate tax?
The estate tax is reserved only for society's wealthiest elite. In 2013, just 0.14% of Americans (less than 2 out of every 1,000 people who die) are expected to owe any estate tax.
How much does the estate tax raise every year?
It's estimated the estate tax will generate about $200 billion in the next 10 years under current law.
What about farms and small businesses?
It's estimated that only 20 small businesses and farm estates nationwide will owe any estate tax in 2013. The Tax Policy Center estimates that these 20 estates will owe only 4.9% of their value in tax, on average. Repeal of the estate tax or exempting farms completely will only encourage further concentration of farm ownership, which reduces competition. An unlimited exemption for farm assets could create a giant loophole from the estate tax because wealthy individuals who expect to owe estate tax could use much or all of their wealth to buy farms before they die.
What makes for a good estate tax?
UFE's Estate Tax Campaign is calling on Congress to stop enriching the inheritors of wealthy millionaires and billionaires by reinstating a robust estate tax. A strong estate tax should raise significant revenue to reduce the deficit and fund vital services. It should only be paid by the top 1% of estates, raising more money from the wealthiest estates through a graduated rate structure. Check out our 2012 Responsible Estate Tax Proposal for more specifics.