Death to Death Taxes
Inheritance is a terribly inefficient way to pass wealth to others.
Estate taxes are among the highest the 1RS levies, ranging up
to 55 percent, depending on size. Then there's state tax. And
if the estate is primarily in a qualified retirement plan—not an
uncommon occurrence—the bite can even soar as high as 70
to 85 percent.
—Stephen M. Pollan and Mark Levine, Die Broke
THE FINAL PIECE OF THE TAX-BASE PUZZLE CONCERNS gifts and inheritances. Current law taxes these to the donors under a distinct federal tax—the gift and estate tax. This tax serves as a companion to the income tax, which never has included gifts or inheritances within its definition of taxable income. Congress, following George W. Bush's lead, voted to repeal the tax as I wrote this book, but the repeal won't go into effect until 2010, and no one but a fool would bet that Congress won't change its collective mind before then.
A major cloud over the repeal lingers because of continued partisan politics over the issue. Conservatives call the gift and estate tax the “death tax” and adamantly support the repeal. Although I don't consider myself a conservative, my own work has been influential in this regard: in 1994 I wrote an article for the Yale Law journal that the New York Times credited with beginning the anti-death tax movement. Liberals, in contrast, just as adamantly oppose radical reform. They advocate instead various partial, ad hoc moves, such