The Economic Growth and Taxpayer Relief Reconciliation Act of 2001 (EGTRRA) phased out the state death tax credit from 2002 to 2004, eliminating it completely for 2005. Prior to EGTRRA, almost all states collected a “pick-up” tax that was equivalent to the federal credit. In 2000, estate and inheritance tax revenues averaged 1.43 percent of states’ total tax receipts. By 2005, the average fell to 0.7 percent.

The early years of the 21st century have been marked by a major tax bill almost every year. This fact sheet looks at the impact of these laws on taxpayers, especially on who benefits and who doesnt, and discusses some unfinished business, including the future of the estate tax and the individual alternative minimum tax.

Republican Presidential Candidate Fred Thompson has announced a tax plan that combines tax cut extensions, additional tax cuts, and an election to pay tax under a new alternative tax system that would substitute a larger standard deduction for all current deductions and credits and have two rates of 10 and 25 percent. Thompson’s plan would reduce federal revenues by $6-7 trillion over ten years, amounting to a reduction of almost 20 percent below current projections, and would be highly regressive. This article describes the proposed changes in the individual income and estate tax and examines their implications for revenue and the distribution of tax burdens.