Originally Posted by loquitur

Host, the OP put forth a bunch of proposals. You object that one of them also was proposed by Bush. That doesn't mean the proposal originated with Bush; it predates him. Some things exist other than by reference to GWB. And some things are true even if GWB says them. This thread isn't about Bush.

I have a number of objections to the way the estate tax is constructed. Don't assume that getting rid of the estate tax will necessarily result in less tax being paid. I can see the logic of AN estate tax, but here is something to ponder. What happens when a person dies is that her heirs get her property. If the dead person bought an asset - a widget - thirty years ago for $1,000 and when she died it was worth $10,000, the heir gets the asset at a $10,000 "basis." So when the heir sells it a couple years later for $15,000, the heir pays tax on the gain of $5,000 (sale proceeds minus basis at date of inheritance), NOT on a gain of $14,000 (sale proceeds minus initial cost). The reason basis "steps up" at the time of death is that the estate tax is deemed to have operated on the dead person's assets, even if the person pays no estate tax. But if you get rid of the estate tax, the heir will pay tax on the entire gain of $14,000.

That's why it's not so cut and dried that eliminating the estate tax will result in less tax revenue. I suspect it will result in more tax revenue, because most estates DON'T pay any tax, but the basis nevertheless steps up because the estate is SUBJECT to tax even if it's not actually LIABLE for the tax. (They don't pay tax because they are not big enough to be hit with the tax; the estate tax kicks in for estates above something like three million dollars; I forget the exact number.)

I hope this wasn't too convoluted.