The estate tax, known also as the death tax, requires that the legal estates or families of deceased individuals pay taxes on inherited assets exceeding $675,000. Starting at 37 percent, the lowest possible assessed rate, estate taxes can reach a maximum level of 55 percent on estates with assets greater than $3 million. First instituted in 1797 to finance the expansion of the U.S. naval fleet, estate taxes have existed in various forms and at different times throughout the nation's history. The current estate tax concept dates back to 1916 and its principles were contained in the Tax Reform Act of 1976, which set the tax rules for all transfers of wealth. While roughly 2 percent of all U.S. families pay it annually, the estate tax generated nearly $23 billion in tax revenues in 1998 alone.

The estate tax has gained increasing attention as it promises to become an issue in November's presidential and congressional elections. This past June, 65 Democrats joined 213 House Republicans, long-time opponents of the estate tax, in passing the Death Tax Elimination Act that would phase out the estate tax by 2010. While President Clinton has promised to veto the bill, congressional Republicans claim that they have enough votes to override such an action. On July 18, the Senate approved legislation also eliminating the estate tax by a vote of 61 to 38. Republican presidential hopeful George W. Bush has promised to terminate the estate tax if elected, while Democrat frontrunner Al Gore has discussed supporting lower rates and abolishing certain elements of the estate tax.

On One Hand...

The death tax unfairly burdens Americans and prevents maximum economic growth. The estate tax penalizes small, family-owned businesses and farms by forcing them to pay taxes at rates too high to survive financially following the death of a previous owner. Furthermore, the death tax is really a secondary tax on money that was previously taxed when first earned.

If estate transfers were free of taxes, recipients would be more inclined to spend and invest this newly received money in the economy, thus increasing general tax revenues. Thus, now is the perfect time to terminate the death tax, as the federal budget surplus is sizeable enough to absorb the immediate loss of tax revenue.

On the Other Hand...

Despite framing the estate tax as an abusive measure targeted at small business owners and family farms, proponents of terminating the estate tax are attempting to shelter the assets of extremely wealthy constituents. Not only does it more evenly distribute aggregated wealth through taxation means, tax incentives included in the current estate tax model encourage increased giving to charitable organizations. Considering federal budget surplus projections are far from certain, it would be fiscally irresponsible to eliminate the estate tax that is integral to federal revenues.

• Averaging around $17.2 billion annually, the estate tax accounts for 1.2 percent of federal tax revenue.

• In 1997, 98 percent of estates were not required to pay an estate tax.

• In 1997, 42,901 estates paid estate taxes.

• According to the Brookings Institution, $7.5 billion in charitable contributions were made by estates worth $20 million or more in 1997.

  Brookings, Time, U.S. News & World Report, The Washington Post, The Washington Times, IRS