Paul L. Caron

Friday, April 29, 2016

WSJ Marks 100th Anniversary Of The Estate Tax, Asks What The Future Holds

100thFollowing up on my previous post, Paul L. Caron (Pepperdine), The One Hundredth Anniversary of the Federal Estate Tax: It's Time to Renew Our Vows, 57 B.C. L. Rev. ___ (2016) (more here):  Wall Street Journal Tax Report, Happy Anniversary! The Estate Tax Turns 100, by Laura Saunders:

In 1916, as World War I raged in Europe, Congress wanted to boost U.S. revenues in case America joined the fighting, so lawmakers voted for a new tax on a person’s assets at death. This levy affected fewer than 1% of Americans who died and raised less than 1% of federal revenue in 1917. ...

So began the modern U.S. estate tax. Today, the tax comes in the form of owing the government up to 40% of your assets at death, above an exemption of $5.45 million per person.

One hundred years later, experts across the political spectrum continue to debate if it should remain. While important details of the estate tax, such as rates and exemptions, have changed over the years, some fundamentals haven’t. ...

The U.S. estate tax has never affected many people, either. According to Paul Caron, an estate-tax specialist who teaches at Pepperdine Law School, it often has applied to fewer than 2% of those dying each year.

And for decades, the estate tax has had features prompting some experts to label it “voluntary”—meaning that planning techniques can reduce or eliminate it. While some are complex, others are simple. For example, each person can make a tax-free gift of up to $14,000 annually in cash or assets to another individual, related or not, and there’s no limit on the number of recipients. ...

What will the future bring? The Republican candidates for president favor repealing the estate tax. The Democrats and President Obama want to strengthen it, perhaps dropping the exemption to its 2009 level of $3.5 million per person.

Michael Graetz, a former Treasury official under George H.W. Bush who is now a professor at Columbia University’s Law School, is a keen student of estate-tax politics. Based on his close observations over two decades, he predicts, “The estate-tax may be repealed. But if it’s not, the exemption won’t go down.”

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Relax Mr. Spradling. Many of us think it is the most American of all taxes.

Posted by: Publius Novus | May 1, 2016 9:30:23 AM

I cannot think of another law that is as un-American to its core as the estate tax. We are supposed to live under a rule of law, right? A legal theory that protects minorities from oppression by a majority, A society where legal property rights are defensible, correct? A community that protects large and small?

Then how do you justify taking money from a family just because a majority of people, who don't have any wealth, think you have too much?

And, please don't bring up this claptrap about breaking up dynastic wealth. Do you really believe people like Buffet, Gates, and so on will pay pay death taxes on their wealth?

Bottom line is we have a small army of professionals and insurance salesmen who make a lot of money by advising the truly wealthy on how to beat the death tax. These same people play on the jealousy of the many to keep their professional honeypot from running dry.

Posted by: Dale Spradling | Apr 30, 2016 11:39:32 AM