Federal Estate Tax
The Issue
Various proposals to repeal the estate tax have been considered over the past several years. With the current make-up of Congress, it does not appear that repeal proposals will find favor; however, because the current estate tax law makes it very difficult to do estate planning, some version of estate tax reform is possible.
What is the Estate Tax?
The federal estate tax is a tax on the transfer of large amounts of money. When someone dies, his or her assets (the person's estate) are distributed to heirs. If the total value of the estate is large enough, an estate tax is imposed by the federal government before the assets are distributed. In 2003, the net value of an individual's estate must exceed the basic exemption of $1 million, with a $2 million exemption for couples. As part of President Bush's 2001 tax cut, this exemption will gradually rise to $3.5 million for an individual ($7 million for couples) by 2009. In 2010 it will go away completely, before it is restored to the 2003 level in 2011.
The Estate Tax and Charitable Giving
By excluding an unlimited amount for charitable giving, the estate tax offers a valuable incentive for estate owners to donate to charity. One-third of private foundation revenues come from estate tax giving. In Maine, according to a study by OMB Watch, repeal of the estate tax would have resulted in a loss of an estimated $54 million in charitable giving in Maine in 2001. The $54 million reduction would equal the total annual grants made in Maine by the largest 12 foundations.
Who pays the Estate Tax in Maine?
Of the 12,534 Maine residents who died in 2003 when the estate tax exemption amount was $1 million, only 107 estates paid the estate tax. In 2003, 99.7 percent of Mainers who died paid no estate tax. Meanwhile all Maine residents benefit from the revenue that it generates. Under current law, only an estimated 24 estates/year in Maine will be wealthy enough to pay the tax after exemptions are raised to their highest level ($3.5 million) in 2009. (Source: http://www.irs.gov/taxstats/index.html)
MANP’s Position
The Estate Tax needs to be reformed in a way that preserves sufficient revenues for the treasury and provides incentives for charitable giving. Gifts from estates support thousands of charitable organizations serving Maine’s communities, our nation and the world, which would be lost or severely diminished with repeal or reform that has high thresholds and low rates.
Read our letters to Senators Snowe & Collins on this issue:
