When considering whether there can be a repeal of the estate tax it is important to understand that politics, as well as economics, govern the system. The pure essence of this tax is to redistribute the wealth among the classes.
The IRS is able to obtain a much greater rate of return auditing estate tax returns than income tax returns. Ten to twenty trillion dollars is anticipated to be passed over the next several years to future generations.
The U.S. Treasury collected more than $23.5 billion in estate tax revenue in 1999. In the year 2000, the total is expected to exceed $26 billion.
However, last summer the press reported that Congress passed a massive tax reduction bill that included the future elimination of the estate and gift law on January 1, 2009. What was not reported is that the estate and gift tax law was returned to our present system on October 1, 2009. This repeal was only scheduled for nine months.Before a true change in the federal estate and gift tax law occurs it is important to understand the repercussions: Will the step up in basis be eliminated at death, which would cause greater tax revenue? As recently as June 10, 2000, it has been reported that the U.S. House of Representatives voted to repeal the estate tax. This proposed legislation is reported to face major hurdles in the U.S. Senate without bi-partisan cooperation and the likelihood of that cooperation between the democrats and the republicans diminishes each day as the presidential election draws nearer.
It is interesting to note that a new report discloses that when analyzing the value of an estate ranging from $650,000 to $5,000,000, the resulting estate taxation has statistically been 51.3% taxation of the estate. It is also interesting to note that the U.S. Treasury collected in excess of $20 billion in estate taxation.