TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, November 6, 2012

CBPP: Ten Estate Tax Myths and Realities

CBPPCenter on Budget and Policy Priorities:  10 Myths and Realities About the Estate Tax:

One of the lesser-known tax breaks that would expire at year-end under current law is a 2010 cut in the estate tax, which had already shrunk considerably between 2001 and 2009 due to President Bush’s 2001 tax cuts. With policymakers expected to consider what to do about the tax in the coming weeks, we’ve updated a paper that corrects the 10 most common myths about it:

  1. The estate tax is best characterized as the “death tax"
  2. The estate tax forces estates to turn over half of their assets to the government
  3. Weakening the estate tax wouldn’t significantly worsen the deficit because the tax doesn’t raise much revenue
  4. The cost of complying with the estate tax nearly equals the amount of revenue the tax raises
  5. Many small, family-owned farms and businesses must be liquidated to pay estate taxes
  6. The estate tax constitutes “double taxation” because it applies to assets that already have been taxed once as income
  7. If policymakers decide to retain the estate tax, the logical top rate would be 15%, the same as the capital gains rate
  8. Eliminating the estate tax would encourage people to save and thereby make more capital available for investment
  9. The estate tax unfairly punishes success
  10. The United States taxes estates more heavily than do other countries

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