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78 IRET Policy Bulletin 1 (1999)

handle is hein.taxfoundation/iretpbul0037 and id is 1 raw text is: October 25, 1999 No. 78 3* WHAT THE VETOED TAX BILL WOULD HAVE DONE FOR ESTATES AND WHY WE STILL NEED TO DO IT* The federal estate and gift tax, or unified transfer tax - a.k.a. the death tax - is one of the most controversial features of the federal tax system. It is terrible tax policy, terrible economic policy, and terrible social policy. This paper begins by describing the provisions of the recently- vetoed tax bill (the Taxpayer Refund and Relief Bill of 1999) that would have eased the tax burdens on estates. Then it explains why there is absolutely no justification in tax theory for having estate and gift taxes, why these taxes are bad economics, and why they fail to achieve any useful social objectives. The Tax Bill Vs. Current Law Current Law. The federal government imposes a unified gift and estate tax (the death tax) on the cumulative transfers made during a person's lifetime and at death to persons other than spouses. Above an exempt amount, the marginal tax rates range from 37% to 60% as the value of the transfers increase. On certain generation skipping transfers, the top rate can reach nearly 80%. The federal estate and gift tax, or unified transfer tax - a.k.a. the death tax ...is terrible tax policy, terrible economic policy, and terrible social policy. A single graduated rate schedule is applied to cumulative taxable transfers. The bottom rate is 18% on the first $10,000 of taxable transfers, rising to a 55% rate on transfers over $3 million. * This paper is based on remarks originally delivered to the Western States Association of Tax Administrators Meeting, in Phoenix, Arizona on September 27, 1999. Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the market economy. 1730 K Street, N.W., Suite 910 . Washington, D.C. 20006 (202) 463-1400 * Fax (202) 463-6199 . Internet www.iret.org