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Coalition to Preserve the Estate Tax:

Modify, Don't Repeal, the Estate Tax

Why Oppose Repeal?

  1. It will increase concentrations of wealth.Since the founding of this country there has been some form of tax on wealthy estates. Estate or inheritance taxes were imposed sporadically and temporarily primarily as a means for raising revenue during war. President Teddy Roosevelt proposed making an estate tax permanent, largely because of his concern about the negative effects of concentrated wealth on democracy. In 1916 an estate tax was enacted. In addition to the generation of revenue, important purposes were to redistribute wealth and help ensure there was no build up of aristocracy.

    Today, less than 2% of estates are liable for the estate tax. In fact, the 15 percent of taxable estates with gross value exceeding $2.5 million paid nearly 70 percent of total estate taxes.

    Several research studies have shown that the estate tax is a powerful force in reducing concentrations of wealth. This is important both from a standpoint of economic efficiency and it is a moral issue. A review of academic literature by Professor James Repetti shows a consistent pattern of increased concentrations of wealth highly correlating with poor long-term economic performance. More broadly, most religions are concerned with social justice – that it is important for the wealthy to give to the less fortunate. The estate tax serves as a powerful incentive to realize this ethical obligation.

  2. It will have an adverse impact on charitable giving. While precise figures on how much will be lost in charitable bequests if the estate tax is repealed is uncertain, it is certain that the tax is an incentive for giving. A comparison of estate filers that have to pay tax and those that do not shows that those that pay the tax give to charity at a rate of 2 to 3 times that of the non-taxpayer. Moreover, as the estate size increases the number of filers making charitable gifts increases as does the amount of the gift.

    More than $14 billion was given to charity in 1995 and that number is rapidly rising each year. The U.S. Treasury Department estimates that between $5 billion and $6 billion would have been lost if the tax was repealed. Others estimate the loss at between 12% and 80%. No matter which numbers you use, repeal of the estate tax will have a substantial negative impact on charitable contributions.

    All charities will feel the impact. Universities, medical institutions, museums, and other cultural groups receive large bequests under the estate tax. While the amounts are smaller, religious institutions receive the largest number of bequests. Even charities that do not benefit directly from charitable bequests will be affected by the repeal of the estate tax. This is because many charities get grants from private foundations, which are directly affected by estate tax charitable bequests. Some estimate that nearly one-third of private foundation assets are derived from bequests.

  3. It will cause cuts in programs and services in our communities because of lost federal and state revenues. In FY 2000, the estate tax raised roughly $30 billion in federal revenues. To put this in perspective, nearly all discretionary programs serving low-income and vulnerable people cost about $30 billion. A cut in revenue of this magnitude surely will have a major impact on federal funding of these types of programs. Moreover, the amount of lost revenue balloons enormously after ten years when the estate tax is fully repealed.

    OverBut the impact is more than just at the federal end. Most states estate tax revenues are directly tied to the federal estate tax. If it is repealed there will be an automatic cut in revenue to states – unless, of course, the state enacts a new tax. There have been estimates that states will lose between $7 billion and $11 billion once the estate tax is fully repealed.

For more information, visit www.ombwatch.org/npadv/estatetax/
Coalition to Preserve the Estate Tax (202) 234-8494



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