The estate tax has been an important source of federal revenue for nearly a century, yet a number of misconceptions continue to surround it. This report briefly describes ten facts about the tax.
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Enacted in 1916, the estate tax is a tax on property (such as cash, real estate, stock, or other assets) that is transferred from deceased persons to their heirs. It is best understood as a tax on inherited wealth because it applies only to large transfers of property.
Legislation enacted in 2001 gradually phased out the estate tax by raising the exemption level and reducing the rate, leading to the tax’s temporary repeal in 2010. The tax was scheduled to return in 2011 under pre-2001 rules (an individual exemption of $1 million and a top rate of 55 percent), but policymakers have voted twice — most recently in the “fiscal cliff” deal early in 2013 — to continue it in much weaker form.