THE FEDERAL tax levied on the estates of the nation's deceased is one step closer to its own demise. A bill eliminating the "death tax," as Republicans like to call it, by 2010 is scheduled for a House vote in June.
It is one of the most vilified sections of the Internal Revenue Code. Opponents cite heart-wrenching stories of families selling off farms and businesses to satisfy the tax. As the net worth of Americans increases, the fear of this tax grows.
Even some Democrats, formerly staunch opponents, are now talking about relieving the burden for all but the wealthiest individuals.
Yet the tax affects very few Americans. About two percent of the people who die each year have estates large enough to be subject to the estate tax. Only a few thousand estates -- those with assets of more than $2.5 million -- pay the bulk of the $5 billion collected annually. They also make the largest charitable bequests.
A study of 1992 federal estate returns showed that the larger the estate, the higher the percentage donated to charitable organizations. Those estates with net worth of less than $600,000 gave away about 16 percent of their value. For those with estates of $10 million, the percentage increased to 36 percent.
This makes sense. Faced with marginal rates of 55 percent, the very wealthy choose to donate money to their favorite hospital, museum, college, or organization rather than have the large sums go to the government.
Rather than totally eliminating this tax and drastically reducing the amount of giving to organizations that benefit the public, Congress should consider a lower tax rate. Let's not completely erase this tax burden on the very wealthiest Americans. Even they need a reason -- other than altruism -- to give away their money.