I haven’t much been following the debate over the “estate tax” repeal proposal. My instinct was to think that if it is a tax repeal, I’m all for it, even though this one seems to be mostly a gift to the yacht set.
But if Stuart Levine is right, this proposal is no tax cut at all, but merely a tax juggling where one hand gives and the other hand takes away:
[P]eople who would not benefit from the abolition of the estate tax would be exposed to tax liability they currently escape due to the operation of the basis step-up rules. The estate tax repeal would likely abolish these rules, thus subjecting capital gains to income tax, in cases where, under current law, the gains would escape tax entirely.…
…The simultaneous repeal of the estate tax and of the basis step-up rules would impose a tax on many, offering relief to only a few. Consistent with Republican philosophy, of course, the few are very rich, the many merely the well-to-do and the simply wealthy.…
…A lot of people, including people in the middle class, benefit from the basis step-up rules. As the estate tax law changes currently enacted take effect, only the few very rich will benefit from a repeal of the estate tax. The losers outnumber the winners by at least a factor of 20. The repeal of the estate tax will have the effect of imposing tax on the less well-to-do to satisfy the really, really wealthy.
