Title
Policy Analysis of Estate Tax Exemption Reform Related to Conservation of Timber resources in USA
Abstract
Estate taxes play an important role in the U.S. tax system. Because they are paid only on estates left by the less-
than-two percent of decedents with the greatest wealth, these taxes add progressivity to federal and state tax systems.
In addition, the estate tax compensates in part for a major gap in the taxation of capital gain income. The gain in the
value of assets held until death is not subject to the capital gains tax; the only way such gains are subject to tax at
all is through the estate tax.
Advocates of proposals to repeal or sharply scale back
the estate taxes often refer to the problems families encounter when they
inherit small businesses and farms but lack sufficient liquid assets to
pay the estate taxes. Claims of the timber farming families that paying
estate taxes forces them to destroy environmentally-sensitive management
systems in their forest lands should be separated from estate tax reforms
because these incentives are only relevant to timber farms, not well coordinated
with state and federal management policies, not necessary due to already
in place sufficient tax relief for these businesses, and not supported
by evidence that the claims regarding cutting to pay estate taxes are in
fact true.
To fully understand estate tax reform in the US political
system, issue networks associated with specific reform attempts can be
analyzed. The coalition which formed to promote the bills of the National
Family Enterprises Preservation (104 H.R. 1212; 104 S. 867), NFEP 95, provides
an excellent example of how an issue network is organized at the local
and federal levels. Furthermore, the proposals in the bills also show how
an estate tax reform attempt went well beyond the measures needed to preserve
small family businesses and farms. The revenue loss to the federal government
would rise to $12 billion a year by 2005. If estate taxes are reduced in
large-scale ways that extend beyond providing targeted relief to small
family-owned businesses and farms, it would provide a windfall to the wealthiest
taxpayers in the country. The cost of the estate tax reduction would have
to be paid for by increasing the amount by which the budget is cut. Thus,
a large estate tax cut benefiting the wealthiest Americans is likely to
be paid for through sharp reductions in programs that benefit low- and
middle-income households who will never amass estates large enough to be
subject to taxation.
Akira KAJIWARA
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059