according to the site, “the winning candidate, if any is found (fingers crossed), will serve as the repeal movement’s new spokesperson. Winners will be featured in brochures, TV ads, and other campaign materials to abolish the Estate Tax. In addition, qualifying candidates will receive a gift bag filled with items from the 18 wealthy families funding the “movement” to repeal the Estate Tax, including a jug of wine from the Gallo Estates, a candy bar from the Mars family, and something kind of nice, but plastic, from the Wal-Mart heirs.”

Best Wishes,
D4L

It’s really tough to explain how shocking that is, until you see it for yourself. Let’s say your parent is in the 25% marginal bracket, and contributes $1 to his retirement plan, then dies. Assuming his estate already hit the $2M point that $1 of tax deferred money is likely to be taxed down to about $.12. Now let’s say that he pays taxes up front rather than deferring. Now after death that $1 is worth $.39. I guess we can just consider that extra $.27 the punishment for tax deferral.

The gist is that the estate tax, in concert with the income tax on tax-deferred savings, is effectively a “confiscatory” tax. In other words, it takes *everything*. This isn’t one of those “paying taxes sucks, but we all do it” kinds of things. This is the government taking pretty much *everything*.

And if that’s something that you support, then that’s OK. But in the interest of calling a spade a spade, hopefully those who support the estate tax will acknowledge that they support taking all of one’s belongs after he dies.

Hmm, not counting the war (660billion and counting!), what about the $10 billion in annual farm subsidies to mostly large corporate farms? Or reining in some of the billions in earmarks added to spending bills every year. Improve overall government efficiency, etc.
If you wanted to go more controversial, think of the savings and tax revenue if marijuana were *gasp* legalized and taxed.

I’m not actually against the estate tax, just the view (by the government and the public) that there is a certain amount of tax revenue the government is somehow entitled to, and that anything that reduces that amount needs to be counteracted by an increase elsewhere, rather than actually having the government *spend less money*!

Also, the numbers seem a bit strange to me. 18,000 estates/year paying the tax and a $56 billion revenue loss means each estate is paying about $3.1 million on average. That would mean an average estate of $6.5 million based on the top 48% rate, or an average estate of $15.5million based on the 20% “real” average rate. With only about 1 million households surpassing the $5million level, that means almost 2% of these wealthy people are dying annually, compared to a national average death rate of .8%. Is the government killing them for the tax revenue, or am I making some error in my understanding?

0.5% of estates face some taxation according to 2005 IRS data.

The budget gap caused by the estate tax’s temporary elimination in 2010 is estimated by the Joint Committee on Taxation to be $56B.

Someone is paying it. About 18,000 people annually pay some estate tax (rather, their estates do). That’s out of the 2.5M people who die every year in America.

Obviously someone is paying the $56B.

Besides, per the Fool http://www.fool.com/taxes/2001/taxes010706.htm , when the estate tax is repealed in 2010 it’s replaced with a carryover-basis, so the money is taxed eventually anyway.

@anonymous - First, I’m sorry that your relative’s heirs had to pay a lot of money in taxes. Paying taxes sucks. But it seems from your examples that the critical piece is the ‘tax deferred’ part. Unless I’m misunderstanding, you’re saying this money had never been taxed. Well, now it has to be.

I’m by no means a tax attorney and I’m not qualified to dissect your examples (hell, I barely followed some parts). Specific examples aren’t of as much interest to me as the basic point.

My central point remains that the estate tax taxes those most able to pay it. It is progressive. I’m sorry if your family is in the 0.5% of Americans that pay it.

You pay:
48% of $1M ($480,000). Then you pay 35% federal 10% state on the $3M ($1.35M), *$1M of which was already taxed at 48%!*

So on an estate of $3M, you just paid $1.83M in taxes, between the estate tax and income tax. Now let’s say that you inherit $10M tax-deferred. You pay $3.84M in estate tax and $4.5M in income tax, for a total of $8.34M in taxes. That’s right boys and girls. That extra $7M that your parents saved is worth only $490,000 after the government gets its take.

You’ll get back a small portion of that thanks to the “Income in Respect of a Decedent” deduction, but that’s a fairly small portion. And of course I’m using round numbers. The 45% federal state is marginal, but on $3M you reach that marginal rate pretty quickly.