The Federal Estate Tax is the tax paid on assets that transfer at death.
The current top rate is 35%, but it could increase to 55%, reverting to the 2001 tax rules if Congress doesn’t continue the lowering of tax of the Bush Administration. The current tax only applies to estates of $5,000,000 or larger, but the prior law applied to estates of $1,000,000 and larger.
Analysts believe the future of estate taxes will probably go one of three ways: 1) let the Bush tax cuts expire to help balance the budget, thereby reverting to system that had a top rate of 55% and began taxing estates of $1,000,000 or more 2) compromise, perhaps with a top rate of 45% and an exemption amount of $3.5 million. 3) continue the tax cuts and leave the exemption and rates where they are today.
What should they do depends upon your political and economic beliefs. Those who lean more to the right favor low or no tax, stating that estate tax is arbitrary and confiscatory redistribution of wealth, and have negative ramifications to business growth. Those on the left feel that funds are needed to help balance budgets, and redistribution helps prevent large amounts of wealth (and power) gradually ending up in fewer hands, recalling a few hundred years ago of America’s monopolies. Perhaps there is room for compromise here, I favor a law that penalizes fewer small businesses and farms, yet considers some of the thoughts contained in the “Gospel of Wealth” by Andrew Carnegie. Carnegie argues the tension created by having an estate tax, has social philanthropic benefits and satisfies the concerns of those in both ends of the spectrum.
