The President Barack Obama led administration has made substantial progress during its tenure to rationalize the US tax code. The Treasury Department at present is adding to that achievement through a few proposed new rules that will close a certain loophole. This gap enables a few wealthy families to skip paying their estate taxes. This action by the Treasury will help the ordinary tax payer as when the wealthy citizens avoid paying their taxes by skillfully using the loopholes, then the burden of paying taxes fall on the middle class taxpayer.
Defining estate tax
Estate tax is a kind of tax imposed on big estates which is transferred in the name of the heirs. It is a long running feature of the American tax code. This law is applicable only on Americans who are valued in excess of $5.45 million- and in the case of the married couple, $10.9 million. This threshold means that only 0.2 percent of total estates are subjected to this estate tax. It is not applicable to 99.8 percent of the Americans. It follows that this estate tax is applicable exclusively on huge inheritances. Considerable revenue is generated from it and the money gained is used by the government to finance vital priorities like national defense, health and scientific research.
Treasury department and action on estate tax
At present, the creamy layer or the extremely rich is being impacted by estate tax. With the assistance of accountants and lawyers, they use a plethora of sophisticated methods to artificially reduce assets’ value applicable to tax purposes. This is done by the placement of certain restrictions on assets so that the value is discounted when they are transferred. This results in lowe tax bills. The value of the property is not changed continues to be the same so that the family takes maximum advantage for it.
Treasury’s latest updates strengthens rules which are applicable to such estate planning strategies. This makes it extremely difficult for the wealthier families to enjoy huge discounts on asset values for tax.
Tax avoidance is reduced and wealthy Americans will find it harder to exploit the loophole and avoid the contribution of fair share. The results can be quite significant. To give an example, the President’s related budget proposal prevented approximately $18 billion of lost revenues over the past decade. The Obama administration has made tax code much fairer than ever before.