Estate and Inheritance Taxes
Our estate and inheritance taxing policy reaches back to 1797 when a Stamp Act was created to fund the War with France. Widows, children and grandchildren were exempt. A key point is that we did NOT actually go to War with France! The Act was repealed in 1802.
The 1862 Revenue Act included a tax on inheritance, again to help finance a war (Civil War). Spouses were exempt and children and siblings taxed at a rate of 3/4 of one percent. It was repealed in 1870.
The War Revenue Tax of 1898 (for funding of the Spanish American War) created another estate tax. It was repealed in 1902.
ALL three estate or inheritance taxes mentioned above were imposed (at least in theory) to finance American wars and more importantly, were repealed afterward.
The Revenue Act of 1916 once again created a Federal Estate Tax and once again it was justified by the need for funds to finance a was; this time World War I.
The difference that time was that taxes on estates (inheritance) was not repealed and we have endured this punitive tax in some form for the past 96 years! All of the modifications that have taken place during the decades since 1916 have simply been tweaks to the basic estate tax laws.
As the political debate heats up once again, it is important to note that Federal Estate tax revenues currently account for between 1 and 1 1/2 percent of total Federal revenues.
Once again, there will be posturing by both sides of the aisle, but in the end, there will be agreements made as to the exemption amounts and other aspects that will make this tax a mute point for virtually all citizens.
My point in making this post is that there should not be an estate or inheritance tax structure that would apply to spouses, children or grandchildren or siblings AT ALL!!. Even further, if property, or business interests, or investments are set to transfer to non-relatives, there should not be an estate or inheritance tax structure as exists now but at most a simple ownership transfer fee (tax). In fact, there should be no Federal Tax policy on this subject at all, but it is doubtful that the "leaders" would be willing to agree on complete revocation.
I find it interesting that in the years after WWI the estate tax was not repealed, as had been the pattern up to that point. Nor was it repealed throughout the next 96 years, even after the WWII years, Korean War years, Vietnam years. Perhaps, our thinking was to just keep this tax in place because war funding was certainly going to be a continuing part of our national experience and certainly has been.
It would appear that once again we have an opportunity for compromise (and possible elimination) with respect to this unwarranted tax, as the tax debate unfolds later this year.
It is Time To Think Again!!