Congress is slowly moving toward permanent repeal of the federal estate tax. A bill has been passed in the House and a similar bill is now in committee in the Senate.
The Tax Foundation has issued a summary report of the estate tax issue. They cite two important issues for entrepreneurs in estate tax policy.
Previous Tax Foundation research has found the estate tax acts a strong disincentive toward entrepreneurship. A 1994 study found that the estate tax's 55 percent rate at the time had roughly the same disincentive effect as doubling an entrepreneur's top effective marginal income tax rate. The estate tax has also been found to impose a large compliance burden on the U.S. economy. Economic studies estimate the compliance costs of the federal estate tax to be roughly $1 for every dollar of revenue raised--nearly five times more costly per dollar of revenue than the federal income tax--making it one of the nation's most inefficient revenue sources.
