Passed into law on September 8, 1916, The Revenue Act of 1916 created a tax on the transfer of wealth from an estate to its beneficiaries. It applied to net estates, defined as the total property owned by a decedent less deductions for debts and administration costs.
- An exemption of $50,000 was allowed for residents.
- Tax rates were graduated from 1% on the first $50,000 to 10% on the portion of the taxable estate exceeding $5 million.
- At its passage, the estate tax affected less than 1% of people who died and it raised less than 1% of federal revenue.
Not much has changed in that regard over the last 100 years: today the estate tax makes up one-half of one percent of federal revenues and still affects still only about 1% of people who die. Continue reading