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The Federal Estate Tax – How Much Does it Mean?

This week, especially, there is a lot of discussion about taxes in general. Part of the discussion for the “Bush tax cuts” is the Estate and Gift Tax and the changes in rates and lifetime exemption amounts that have occurred since 2001. Although Estate taxes are exciting to the attorneys at our firm, and they have a daily impact on the planning that we do, there is an argument that the Estate Tax is not all that important. (That argument hurts our feelings).

Whether that argument advances the side pushing for reduction or total repeal, or whether that strengthens the argument for regression and reduction of the exemption amount to 2001 levels is not my place to say. However, it is interesting to see how much (or how little) of a benefit the Federal Government does receive from the Estate and Gift tax program.

Federal Receipts for 2001 under the Estate and Gift Tax program resulted in $28.4 Billion.* (I look at 2001 because it was a year prior to effective changes to the Estate Tax). That number sounds large; extremely large. Until compared to the total receipts under the Inpidual Income Tax, Corporate Income Tax, Employment Tax, etc. The Estate Tax produced only 1.43% of the Treasury’s receipts for 2001. With the decrease in Estate tax rates and increase in lifetime exclusion amounts, this figure was reduced to $23.4 Billion, and 1.11% of the Federal receipts.

In conclusion, whatever the result is this week with the debate on taxes, and despite the publicity afforded the Estate Tax; it is interesting to see that it is actually a very small player in income received by our government.

* This figure, and the figures used to generate the chart below come from p. 66 of the Presentation prepared by the Staff of the Joint Committee on Taxation and was presented to the Senate Committee on Finance on December 2, 2010. http://finance.senate.gov/imo/media/doc/120210tbtest.pdf



- Attorney Jason Walker