Argument: Double taxation hardly occurs with the estate tax
- Debate: Estate tax in the United States - pro argument.
FactCheck.org "Estate Tax Malarkey: Misleading ads exaggerate what the tax costs farmers, small businesses and 'your family'" 6/5/05: "It is true that some portion of a taxable estate might be made up of cash that was taxed before, when it was earned as income. But many estates are made up of stocks, bonds, real estate or other holdings that have appreciated greatly in value over the lifetime of the person who owned them. The owner didn't pay taxes on that profit during his or her lifetime because they weren't sold and the profits weren't turned into cash, or "realized." Furthermore, heirs who inherit such appreciated assets won't have to pay tax on that unrealized profit either. The estate tax is the only tax that applies to such unrealized capital gains [see below explaination of "step-up basis" for capital gains]. Furthermore, such unrealized, untaxed capital gains make up more than one-third of the average estate, according to a study by economists James Poterba of the Massachusetts Institute of Technology and James Weisbenner, who was on the staff of the Federal Reserve Board when the study was published in 2000. Weisbenner is currently at the University of Illinois at Urbana-Champaign. Their study estimated that unrealized capital gains made up 36.3 percent of the value of all estates in 1998. That would make the "double tax" claim 63.7 percent true, and just over one-third false. For very large estates it is mostly false. The study also found that estates worth more than $10 million were 56.4 percent made up of unrealized, untaxed capital gains."