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Chipsboss: "I think that the proposals to abolish the step up are really intended to sabotage the idea of abolishing the FET, precisely because so many estates benefit from that step up. Here are some results from this site for computing inheritance taxes --

http://www.sunlife-usa.com/cgi-bin/sunlife2.pl --
Your taxable estate tax total is $1350000.00 .*
Your calculated estate tax total is $ 270750.00 .

So, if I've got this right, an estate that was composed solely of 1.35 mil in unrealized capital gains would pay 20% under the present law and, if capital gains without step-up replaced present law, would still pay 20%. Seems to mean that any estate with less than 1.35 mil in unrealized capital gains is better off under present law that under the (sabotaged) proposals to abolish FET.

http://www.brentmark.com/estaterepeal.htm talks about FET. Excerpt: "Four reasons were given for possible repeal: more people becoming subject to the tax, the relatively tiny portion of revenue raised, powerful lobbies opposing the tax, and arguments by economists that the tax is counterproductive."

http://www.heritage.org/taxcut/chapt6.html says "The estate tax has few friends, other than tax attorneys, and raises very little revenue at a heavy cost to the economy. . . (The FET) raises very little money -- in fact, it may cost the government and the taxpayers more in administrative and compliance fees than it raises in revenue. As this study has shown, the economic cost of the estate tax is many times greater than the revenue it produces, and its reach into American households extends far beyond those few that pay it."

The FET has raised only about 1% of the government's revenue in the last two decades, so there is no great need to impose the no-step-up rule to recoup revenue lost from FET repeal. These sites argue that economic activity would be so stimulated by FET abolition, there would be a net GAIN in federal revenues. (Who knows? I'm only quoting. I predict with fair confidence that the public still supports FET repeal and Congress does not.)

http://www.deathtax.com/deathtax/economics.html gives arguments for and against. Excerpt:
"The Economics of the Estate Tax, A Joint Economic Committee (JEC) Study, December 1998. (The JEC is one of four Joint Committees of Congress representing bipartisan representation from the Senate and the House of Representatives) The study examines the arguments for and against the federal estate tax and concludes that the tax generates costs to taxpayers, the economy and the environment that exceed its potential benefits."


Nice post. I glanced at the websites and they are long on general discussion and conclusions and short on the details and assumptions. I do not currently have time to track down and read the underlying documents. We all know that the devil is in the details. Personally, I also like Twain's "There are lies, there are d@mned lies, and then there are statistics." Economists are also notorious for making simplifying assumptions that make for a nice theory bit do not necessarily reflect reality.

Regards, JAFO

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