What you may not know about your income tax

A: Few estates are taxed, contrary to widespread concerns. In 2003, 2,448,288 Americans died. But only 30,276 estates were taxable when their returns were filed in 2004 - that's 1.24 percent. Those returns had to involve more than $1 million in assets to be taxed.

This year the estate tax only applies to estates over $2 million ($4 million for a couple). Only 0.27 percent of estates are likely to owe Uncle Sam.

Nonetheless, most of those estates are so huge - in the multimillions and billions - that full abolition of the estate tax would cost Washington $1 trillion in revenues over 10 years, reckons United for a Fair Economy, an advocacy group in Boston. The Senate is scheduled to consider legislation to eliminate or shrink "death" taxes next month.

By the way, estates subject to tax in 2004 paid, on average, 11.5 percent of the net estate after expenses to Washington, notes a new study by McIntyre.

Yet, a new Tax Foundation public opinion poll finds 68 percent of adults favor elimination of the estate tax.

A: A month ago, the Congressional Budget Office put the total deficit for fiscal years 2007 through 2011 at $1.1 trillion. But that assumes Congress does not extend any of the Bush tax breaks (including cuts in the estate tax), and that it fails to provide any relief from the Alternative Minimum Tax that otherwise could hit 19 million middle-income taxpayers this year.

With elections this fall, many Washington observers doubt Congress will take major steps to reduce the deficit. President Bush's latest budget calls for $230 billion more in tax cuts over the next five years. Congress may not even pass a budget resolution.

"It will be difficult," says Leonard Burman, a tax expert at the Urban Institute in Washington. But perhaps Congress will tackle the budget issue more seriously in a postelection session. And maybe revenues will pour in faster than predicted.

A: This year, the average for all taxpayers is 21 percent, according to estimates of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, both Washington think tanks.

The tax burden varies. The bottom one-fifth of taxpayers pay 3.3 percent of their income, the next fifth 7.5 percent, the middle quintile 14.4 percent, the fourth quintile 18.6 percent, and the top fifth 25.1 percent.

Millionaires and billionaires don't pay proportionally much more to Uncle Sam. The top 1 percent will pay 29.3 percent of their income, and the top one-thousandth 31.4 percent. About 345,000 Americans make more than $1 million.

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