To the extent these problems exist, they account for an extremely small portion of all estates subject to estate taxes. The problems of small, family-owned businesses and farms can be addressed at a modest cost to the Treasury. By contrast, the estate tax provisions in the Senate Republican Leadership tax plan would reduce the estate tax for large estates and for large family-owned business. The proposals go well beyond the measures needed to preserve small family businesses and farms.
Estate taxes play an important role in the U.S. tax system.
In addition, the estate tax compensates in part for a major gap in the taxation of capital gains income. A particularly stark contrast is drawn by including a costly estate tax reduction that benefits large estates in an agreement to reduce the deficit and balance the budget. The cost of the estate tax reduction would have to be paid for by increasing the amount by which the budget is cut. Most estate taxes are paid by large estates rather than by small family-owned farms and businesses. The Joint Committee on Taxation estimates that only 1.66 percent of all decedents in 1997 will have estates large enough to require payment of some estate tax.