Legislation setting a 35 percent estate tax rate with a $5 million exemption is now law -- at least for two years . . ....Read more
Big Differences in Candidates' Estate Tax Proposals
- October 24th, 2008
Both Sens. Barack Obama and John McCain oppose complete repeal of the estate tax, but they have put forward competing plans that would have very different impacts on the federal budget.
A new report by the Tax Policy Center of the Urban Institute and Brookings Institution estimates the effect of the two candidates' proposals -- and other congressional proposals -- compared to current law. Under the current law, the Economic Growth and Tax Reconciliation Act of 2001 (EGTRRA), the estate tax will be repealed for one year in 2010 and then return to its pre-EGTRRA levels in 2011, when the individual exemption was $1 million and the top tax rate was 55 percent. According to the report, if this law is not changed, it will generate about $490 billion in estate taxes through 2018.
The Obama proposal: Sen. Obama has proposed permanently extending the 2009 estate tax provisions. Beginning in 2010, estates of $3.5 million or less would be exempt from tax and the estate tax rate would be 45 percent. Under his plan, in 2011, there would be 7,200 taxable returns. Between 2008 and 2018, the Obama proposal would generate $292 billion in estate taxes, about 60 percent of the $490 billion projected under current law.
The McCain proposal: Sen. McCain's proposal would permanently raise the estate tax exemption to $5 million and cut the rate to 15 percent beginning in 2010. In 2011, only 3,600 returns would owe any tax, about half the number under the Obama proposal. Through 2018, the McCain plan would generate $100 billion in estate taxes, only about 20 percent of the amount projected under current law.
To read the full report, "Back From the Grave: Revenue and Distributional Effects of Reforming the Federal Estate Tax," click here.
(The report is in PDF format. If you do not have the free PDF reader installed on your computer, download it here.)
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