The Estate Tax: Even Worse than Republicans Say
Compliance Costs a Major Burden for Families
Washington, D.C., September 4, 2012—The federal estate tax, temporarily reduced to zero as recently as 2010 but now set to increase dramatically in the coming year, is a failure by even the most generous standards and should be permanently eliminated, according to a new analysis from the Tax Foundation.
“The estate tax fails to raise significant revenue and reduce inequality, causes serious damage to capital accumulation by reducing savings, and also has high compliance costs,” said Tax Foundation economist Scott Drenkard. “Its repeal would increase economic growth and some studies even find that it would raise tax revenues.”
A recent study issued by the Republican staff of Congress’ Joint Economic Committee detailed many of the failings of the estate tax, calling for either a significant reform or outright repeal of the estate tax. The report, which referenced four separate Tax Foundation studies and testimonies, reached similar conclusions to those which Tax Foundation analysts have reached with regard to the estate tax.
This new analysis, however, strengthens the case for repeal with additional evidence of the compliance burdens inherent to the estate tax. These costs are larger than is often understood, so much so that tax revenue is likely to actually increase upon repeal in the coming years.
Research has indicated that income and capital gains tax revenues will increase significantly if the estate tax is repealed even without an increase in economic growth. Several articles have found that repeal would be revenue neutral over all, or even revenue positive, over a 10 year period if both the tax changes and economic growth are considered together.
Tax Foundation Fiscal Fact No. 326, “The Estate Tax: Even Worse than Joint Economic Committee Republicans Say” by Scott Drenkard and David Block, is available online.
The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.