I take it "Lucky Ducky" wins again
Estate Taxes Show Fewer Modest Fortunes but More Big Ones
By DAVID CAY JOHNSTON
The number of Americans who left modest fortunes when they died declined in 2003 from 2001, while the number who left large fortunes increased, government data posted on the Internet showed yesterday.
The data, from the Internal Revenue Service, provide the first glimpse of how the reductions in the estate tax championed by President Bush, which took effect in 2002, have reduced the taxes on the wealthy.
The estate tax now applies only to estates greater than $1 million, up from $675,000 when Mr. Bush took office. Those figures double for married couples.
The estate tax applies to all assets - after deducting debts and expenses like funerals and legal fees - in excess of $1 million a person. Mr. Bush and others, who call this tax the "death tax,'' assert that it represents second, third or even fourth taxation of the same dollar. In most estates, however, some or all of the dollars have never been taxed because the person held unrealized capital gains or the wealth grew from a tax-free gift.
The number of moderately rich estates- those with taxable fortunes at death of $1 million to $2.5 million - fell to 21,635 in 2003 from 24,591 in 2001, a decline of 12 percent, the I.R.S. report showed.
The value of publicly traded stocks held by these individuals declined 34 percent, to $7.2 billion in 2003 from $10.8 billion in 2001. The figures suggest that the drop in stock prices pushed the wealth of many people below the threshold for the estate tax, explaining why fewer people were in this category.
Despite the decline in the value of stocks since 2000, the average wealth of those in this category rose $92,000, or almost 6 percent, to just under $1.6 million, as the value of homes and other real estate rose sharply and the value of bonds grew. This partly reflected falling interest rates, which make real estate and bonds paying higher than current interest rates more valuable.
Over the same period, the number of taxable estates valued at $20 million or more, the highest category in I.R.S. reports, increased nearly 8 percent, to 505 from 469. More significant, the average value of these estates grew to $62 million, a 10 percent increase from 2001, when their average value was $56.4 million.The values reported on estate tax returns can be based on the date of death or six months after death if the value of the assets has declined. Estate tax returns are typically filed nine months after death. Thus the figures on wealth holding tend to reflect conditions stretching over parts of two years.
The estate tax produced 9.5 percent less revenue for the federal government in 2003 from estates of $1 million or more than in 2001, despite a 1.4 percent increase in total value of such estates, the data show.
Total estate tax revenue fell to just under $20.7 billion, a decline of more than 12 percent from 2001, because the threshold was raised to $1 million. Taxes from estates valued at less than $1 million were zero in 2003; the 2001 figure was almost $711 million.
Over all, the share of estates paid in estate taxes fell slightly, to 18.8 percent from 19 percent. Among estates valued at $1 million to $2.5 million, the moderately rich, the average tax rate fell to 11.2 percent from 15.2 percent, reducing the effective tax rate more than a fourth. For the superrich, those leaving estates of $20 million or more, the average tax rate fell to 16.5 percent from 18.4 percent.
