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80 IRET Policy Bulletin 1 (2000)

handle is hein.taxfoundation/iretpbul0039 and id is 1 raw text is: June 29, 2000 No. 80 3* - THE DEATH TAX ELIMINATION ACT OF 2000 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. The Death Tax Elimination Act of 2000 is a big step forward toward sound tax policy. It is not perfect; it is a very slow phase-out of a very bad tax, and makes the mistake of repealing the step-up in basis of capital assets at death. Nonetheless, the bill would reduce the cost of capital, boost investment and productivity, preserve family businesses, and increase wages throughout the workforce. Eliminating the tax would also bolster federal revenue by discouraging the shifting of assets during life from upper-bracket parents to lower-bracket children or to tax-exempt entities. Repeal of the tax would probably pay for itself through economic expansion and reduction in tax avoidance activities. The Tax Bill Vs. Current Law Current law. The federal government imposes a unified gift and estate 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%. Thefederal 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. There is a 5% surtax imposed at death on taxable transfers between $10 million and about $17 million; the surtax boosts the marginal tax rate to 60% on transfers within that range and phases 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 o Internet www.iret.org