Center on Budget and Policy Priorities Report on Federal Estate Tax

The Center on Budget and Policy Priorities released a policy basics report earlier this month in which they explained that the federal estate tax has weakened for the past 15 years. This news comes despite beliefs that the tax has little effect on high income taxpayer’s saving and provides heirs with a work incentive, thus making it an effective way to increase revenue without hurting taxpayers with lower incomes. According to the report,

Legislation enacted in 2001 gradually phased out the estate tax by raising the exemption level and reducing the rate, leading to the tax’s temporary repeal in 2010. The tax was scheduled to return in 2011 under pre-2001 rules (an individual exemption of $1 million and a top rate of 55 percent), but policymakers instead permanently extended it in much weaker form.

Under current law, the exemption level is $5.45 million per person for 2016, indexed for inflation, and the top statutory rate is 40 percent. The estate tax will generate about $249 billion over 2017-2026 under current law, according to the Congressional Budget Office.  The President’s 2017 budget proposes returning to the 2009 estate tax parameters with an exemption level permanently at $3.5 million per person ($7 million per couple) and the top rate at 45 percent, which would raise an additional $161 billion over 2017-2026.

View the full report here: Policy Basics: The Estate Tax

Posted by Allison Trupp, Associate Editor, Wealth Strategies Journal

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