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Where, Oh Where, Has the Estate Tax Gone?

Roberton Williams

Published: December 23, 2009
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Reprinted with permission of Tax Analysts.

The text below is an excerpt from the complete document. Read the full report in PDF format.


Abstract

Unless Congress changes the law, the federal estate tax will disappear on January 1, 2010. For the first time since the 1916 inception of the tax, the estate of anyone dying in 2010 will go to heirs tax free, a result of the 2001 tax law that phased out the estate tax over 10 years. But that law itself expires in 2011 and the estate tax will revert to pre-2001 law.


Introduction

The Economic Growth and Tax Relief Reconciliation Act of 2001 increased the effective estate tax exemption in steps from $675,000 in 2001 to $3.5 million in 2009 and reduced the top tax rate from 55 percent to 45 percent. Raising the exemption cut the share of estates subject to tax by nearly 90 percent - from 2.14 percent in 2001 to a projected 0.23 percent in 2009. That percentage is the lowest since at least 1934 (see figure).

(End of excerpt. The entire report is available in PDF format.)