Estate tax history in United States versus myth
The U.S. Senate has followed the House in voting to repeal the estate tax. Estate tax supporters claimed that from the beginning, it was designed to redistribute wealth. But history shows the it existed solely for revenue purposes until the 1930s. The first estate tax - enacted July 6, 1797, to help pay for naval rearmament - required only the purchase of federal stamps for wills and estates, but was terminated four years later because the need for the revenue passed.
A direct tax on inheritances imposed in 1862 during the Civil War ranged from 0,75 percent to 5 percent.
The top rate was raised to 6 percent in 1864; but the tax was then abolished on July 14, 1870.
In 1898, an estate tax with a top rate of 15 percent on estates over $1 million was imposed to pay for the Spanish-American War - then repealed on April 12, 1902.
America's fourth estate tax, enacted in 1916, set a top rate of 10 percent on estates over $5 million. It was raised to 25 percent in 1917, but this rate applied only to estates over $10 million. Unlike its predecessors, it was not repealed after the war, although the top rate was dropped to 20 percent in 1926.
President Franklin Roosevelt raised the top rate to 60 percent in 1934, and to 70 percent in 1935. The same bill increased the top income tax rate to 75 percent and increased corporate taxes. Altogether the law raised just $250 million annually. Today the estate tax goes up to 60 percent. It exists only to redistribute income, since its revenue yield is negligible. But estate planning makes the tax virtually voluntary, according to estate tax experts.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, July 19, 2000.
For text http://www.ncpa.org/oped/bartlett.html
For more on Estate Tax http://www.ncpa.org/pi/taxes/tax63.html#2
Publish date: 30 August 2000
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