The problem with the current estate tax:
Up to 22,000 Farms, 14,000 real estate partnerships, 29,000 privately held corporations and 170,000 total households will be susceptible to estate taxes in 2011 (Duquesne: Prof. Antony Davies)
The ASSET Solution
The ASSET proposal is based on permitting the capital gains tax on estate assets of wealthy taxpayers to replace the estate tax. The same result as eliminating the estate tax.
Assets would pass to heirs at their original value (carryover basis). The IRS will track these assets, and the capital gains tax on their sale will produce more revenue than the estate tax does now.
Because assets would not be taxed at death, but only if and when they are sold by heirs, there may be a short lag time while the capital gains revenue catches up to the previous level of the estate/gift tax.
To maintain the same level of revenue to the treasury during this lag time, we propose a temporary charge of 1.5% to 2% on the AGI of taxpayers earning $1 million or more. This assures 100% of the existing tax revenue while the capital gains builds up.
To be revenue neutral, as the capital gain tax flow begins the AGI charge will be reduced proportionately until it is completely eliminated. The additional revenue will go to the Treasury.
The end result is the same as it would be if the estate/gift tax were eliminated.