Last week, the House of Representatives voted to kill the federal estate tax with a vote of 240-179 in favor of H.R. 1105. This week, the bill headed to the Senate where it faces an uncertain future.
What is certain is that the federal estate tax is unpopular. It's consistently ranked at the top of the list of the most hated taxes in the country.
It's also a money maker. In 2012, the total net estate tax reported on federal estate tax returns filed for the year was $8.5 billion (downloads as a pdf).
Over the years, there have been many iterations (downloads as a pdf) of a federal estate tax in the U.S. The first notable estate tax, or death tax, was written into the The Stamp Tax of 1797 to help fund a war against France. In 1802, that tax was repealed.
When Congress needed money again - in the U.S. Civil War - they again turned to a death tax with the Revenue Act of 1862. After the war, the tax was repealed in stages (1870 and 1872).
Yet another war, the Spanish-American War, caused Congress to try again with a new death tax, the federal legacy tax. When the war ended in 1902, the tax was again repealed.
It would take another war (sensing a pattern?) for the next federal estate tax to become law. The advent of World War I resulted in the Revenue Act of 1916. This time, the federal estate tax would stick although it would go through a number of changes, including the unification of the federal estate and gift tax systems in 1976.
The federal estate tax as we know it now is much different than it used to be, largely because of the exemption amount. Today, most estates pass outside of the federal estate tax system and don't even require the filing of a return. For 2015, the exemption amount is $5,430,000 for a single person: with portability, a married couple can pass $10,860,000 in assets to heirs without being subject to the federal estate tax. The exemption amount is tied to inflation and will continue to increase.
The federal estate tax continues to be polarizing... So today's Fix The Tax Code Friday question is:
Should the federal estate tax be repealed?
