FREQUENTLY ASKED QUESTIONS ABOUT THE "DEATH TAX" AND THEIR ANSWERS
 

What is the rate of the estate, gift and generation-skipping tax (the "Death Tax")?

Effective 2004, after utilization of a $1.5 million exemption, the rate of tax is 43% and once assets have reached the size of $2 million, the rate of tax is 47%.
 

What is the applicable lifetime exclusion amount?

The applicable lifetime exclusion amount is $1.5 million in 2003 - Scheduled to increase to $3.5 million in 2010.  It is the amount that an individual can pass, free of gift tax during life or estate tax at death to anyone they choose.
 

How much revenue is raised by the Death Tax?

Less than 2% of the government's revenue is generated from the "Death Tax." In 2001, it was $23.5 billion, just 1.4%.
 

What size estates file estate tax returns?

86% of all taxable estates filed in 2001 were $2.5 million or less in size.
 

Estates of what asset size pay estate taxes?

47.7% of all estate taxes paid in 2001 came from net taxable estates of $5 million or less.
 

What country has the highest rate of "Death Tax"?

Japan has an inheritance tax of 70%, but after credits and exemption it is an effective tax rate of 30.3%.  The United States has the highest rate of estate tax in the world at the rate of 47%.
 

Is the "Death Tax" a disincentive for the growth of family businesses?

In a study conducted by The Tax Foundation, it was found that to match the disincentive effect of the estate tax, income taxes would have to be raised up to roughly 70% or almost twice the top marginal income tax rate of 39.6%.
 

When is the "Death Tax" due?

The tax is due 9 months after the date of death, and is payable in cash.
 

What is the history of estate, gift and generation-skipping taxes?

The Death Tax was initiated in 1916 to fund World War I.  It was maintained in the tax code through the 20's and 30's to help prevent the concentration of wealth.  Since that time, anti-trust laws have eliminated those concerns, but to date, the Death Tax remains intact.
 

What is the cost to collect the "Death Tax"?

According to the Joint Economic Committee report, dated December 1998, the cost to comply and collect the tax is equal to the revenue raised.
 

What is the general public's attitude towards repeal of the "Death Tax"?

In national polls, focus groups and instant response sessions - 70% of respondents believe that the "Death Tax" should be repealed.
 

How many family businesses are there in America?

Within the definition that the family controls the business either by stock or through management, 91% of all businesses in America are family owned.
 

How does the "Death Tax" affect the succession of the family business to future generations?

More than 70% of family businesses do not survive the second generation. 87% do not make it to the third generation.
 

What is the generation-skipping tax?

The generation-skipping tax or GST is a tax on assets that you pass on to your grandchildren at an effective 80% rate, once you have utilized your GST exemption.
 

Have the assets that are taxed with the "Death Tax" been taxed before?

Yes. Those assets have been taxed at least two or three times before.
 

How many states have repealed inheritance taxes?

Twenty-three states have repealed inheritance taxes since 1980.
 

What is the economic effect of repealing the "Death Tax"?

In a study done by The Center for the Study of Taxation, it was determined that if estate, gift and generation-skipping taxes had been repealed in 1971, by the year 1991 there would have been 262,000 more jobs, $46.3 billion more in GDP and $398.6 billion more in capital.
 

How does the small business community view the "Death Tax"?

Unfavorably. Ninety trade and industry organizations have formed the Family Business Estate Tax Coalition, whose sole purpose is to repeal the "Death Tax."