Citizens for Tax Justice issued a new report this week showing that the percentage of deaths resulting in federal estate tax liability is less than one percent nationally -- and in most states -- and continues to fall. The report points out that President-elect Barack Obama's proposal to reduce the estate tax even further is therefore unnecessary.
Under the tax cut enacted by President Bush in 2001, the estate tax is being gradually reduced each year until it disappears entirely in 2010. But, like almost all of the Bush tax cuts, the gradual changes in the estate tax expire at the end of 2010. This means that if Congress simply does nothing, the estate tax will be repealed for one year in 2010 and then will return in 2011 in a form much closer to what existed at the end of the Clinton years.
President-elect Obama proposes to make permanent the estate tax rules that will be in effect in 2009 under current law, which includes a larger exemption than the one in effect today. Obama's proposal would be an improvement in the sense that it would prevent the estate tax from disappearing in 2010. But it would be a regressive and costly giveaway to the very wealthiest families in America, because it would mean that the tax would affect even fewer estates than it does now.