Tuesday, June 27, 2006
Congress is debating permanent repeal of the federal estate tax. The "death tax" is assessed at a high rate on the accumulated savings of deceased persons above a basic exemption amount. Some pundits say that repeal would be an unfair break for the wealthy, but the issue is more complicated than that. Many public finance experts believe that the estate tax causes broad harm to the economy by suppressing investment and generating unproductive tax avoidance activity. In addition, the estate tax might not raise any revenue for the government when all its effects are taken into account....
Does the United States need an estate tax? Table 1 shows that many countries have decided that they do not. Of 50 countries surveyed by PricewaterhouseCoopers in 2005, 24 do not have an estate or inheritance tax, including Australia, Canada, New Zealand, and Sweden. Of the 26 countries in the table that do have estate or inheritance taxes, the United States has the third highest rate at 46%:
[Click on chart to enlarge.]