Wishing a happy 100th birthday to the Estate Tax!
In 1916, Congress instituted the estate tax to boost U.S. revenues just in case we joined the fight in World War I. At the time, the top rate was 10% and the exemption was $50,000, which meant it affected less than 1% of estates. Proponents of the tax thought it was a reasonable way to raise money while its opponents in Congress thought it was a matter best left to the states.
The U.S. had imposed temporary taxes on estates to pay for earlier conflicts but they were always repealed. The reason this one lasted was the hope that it would preclude the establishment of an aristocracy in America by preventing concentrations of wealth. Presidents Theodore and Franklin Delano Roosevelt were both proponents, as well as Andrew Carnegie, despite the size of their own estates. One particularly extreme view was that of Senator Huey Long of Louisiana. He wanted to confiscate all fortunes that were greater than $8 million.
Now, the estate tax is 40% on assets owned at death above the exemption amount. For 2016, the exemption amount is $5.45 million. It’s estimated that only about 4,400 people will have taxable estates this year.
