14 June 2006

Estate Tax Repeal Losers

Everyone knows that the federal treasury loses significant funds if the federal estate tax is repealed. Few people know, however, that there are more taxpayers who pay more taxes after repeal, than there are taxpayers who receive a tax cut from estate tax repeal.

According to a study by Congress's nonpartisan Joint Committee on Taxation, 7,500 estates would be better off under full repeal in 2010 than under the 2009 rules -- but more than 60,000 would be worse off.


At fault is the conversion from a stepped up basis for capital gains tax purposes at death to a carryover basis rule after repeal. For anyone with $1.3 million to $3.5 million in wealth and substantial appreciation in capital assets that has not been taxed, and some people a little over the $3.5 million level, estate tax repeal is a tax increase.

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