Eliminating Estate and Inheritance Tax is a Serious Option for Reform

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from NCPA,

The United States is one of many countries that levy taxes on estates or inheritances, but most countries do so with lower top rates. Estate and inheritance taxes are broadly similar because both are generally triggered by death, and both of them are poor economic policies. They fall almost exclusively on the domestic capital stock. That will restrict job growth and harm the economy.

The United States, under current law, has a high top rate and a large exemption. As a result, its estate tax, despite the high rate, raises very little revenue.

– The U.S. estate tax has an exemption of $5,430,000 in 2015.
– In total, current revenues from the estate tax are barely half of what they were in real terms at the start of the millennium. The tax raised almost $38 billion (2015 dollars) in 2001, and it will raise only $20 billion in 2015. This is less than 1 percent of annual federal revenue.

As the United States maintains one of the highest estate taxes in the world, many countries are increasingly moving to eliminate this tax. Eleven countries and two tax jurisdictions have repealed their estate or inheritance taxes since the year 2000. The two tax jurisdictions to repeal are Macau and Hong Kong. Also notable for eliminating their inheritance and estate taxes are Norway and Sweden, countries usually known for progressive politics.

Repealing the estate tax in the United States would increase investment, add jobs and expand the economy. A simulated elimination of the estate tax results in:

– Approximately 150,000 additional jobs.
– 0.08 percent additional annual Gross Domestic Product (GDP) growth in the decade after elimination.
– In the long-run, the repeal would result in higher annual federal revenue of $8 billion due to the increased economic growth.

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