On July 14th, the IRS held a public hearing for the debt-equity rule (section 385 of the IRS code) that the Treasury Department proposed last April. The hearing, which had as many as 16 speakers from various industries,...
- The Tax Policy Blog
- 365 Days until Estate Tax Mayhem Begins
365 Days until Estate Tax Mayhem Begins
Beginning tomorrow (2009), the federal estate tax will have a rate of 45 percent combined with a generous exemption level of $3.5 million. That's until Dec. 31, 2009.
On Jan. 1, 2010, the federal estate tax rate is scheduled to be zero. That's until Dec. 31, 2010.
On Jan. 1, 2011, the federal estate tax rate is scheduled to be 55 percent with an exemption level of only $1 million.
(Note in 2010 the unlimited step-up-in basis will also cease as there will essentially be no estate tax.)
All of this has many tax scholars wondering how death rates may be affected in late 2009 and late 2010. A person who is on his death bed this time next year may be in a position to save millions if he can just extend his life a few more hours (or have the doctor fudge the time of death). Two years from now, a person may be in a position to save his family millions by dying earlier (or again having the doctor fudge the time of death).
Research by scholars, most notably Joel Slemrod, has shown that a statistically significant death tax elasticity has existed in the past.
Get Email Updates from the Tax Foundation
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.