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The Estate Tax Stays

The Wall Street Journal recently published a front-page story about the estate tax.
Under current law (passed in 2001), the tax is scheduled to disappear next year (but come back with a very low exemption in 2011). President-elect Obama will quickly push to abolish the repeal and instead freeze the exemption at $7 million for a couple, with a marginal tax rate of 45 percent on estates above that.
I find this a very appealing solution; $7 million currently exempts all but the top 1 percent of estates and is surely enough to keep most small-business owners’ firms intact for their heirs.
The very rich will have to pay taxes on the estates left to them; but given the income tax cuts they have received in the past eight years, and given the widening of the income distribution, especially at the very upper end, this minimal estate tax seems a reasonable move toward a little bit more equality of lifetime incomes. It goes a bit of the way toward restoring vertical equity.