Baby boomers, the oldest just now reaching retirement age, can expect to receive inheritances equaling more than $8 trillion over their lifetime.
It's a record intergenerational transfer of wealth. It also provides a welcome financial boost to the federal government and the 19 states and the District of Columbia that also impose inheritance taxes on the estates of the well-to-do.
Indeed, increasing the estate tax – or introducing one – would be a good way to help ease the budget crises in many states, says Lee Farris, an expert at United for a Fair Economy (UFE), a coalition of national and state organizations that aims for a more equal distribution of wealth and income.
Existing state estate taxes typically raise 1 to 4 percent of total state revenues. State legislators may find raising estate taxes tempting.
The state levy can be substantial. In Massachusetts, an estate worth more than $1 million is subject to the tax. Since a good Boston suburb may have many houses valued at, say, $500,000 to $900,000, it doesn't take too much in other assets to reach $1 million.
And the tax is progressive. It can be as much as 16 percent of the value of a huge estate.
That tax comes on top of any federal estate tax. The deal reached in December by President Obama and Republican leaders set the federal rate at 35 percent for the next two years on estates worth more than $5 million. With Republicans in control of the House, there are already four or so proposals to repeal the estate tax completely.
With new House rules, there would be no need to raise revenues elsewhere to offset that loss of revenue of perhaps $20 billion in the next two fiscal years.
Unless Mr. Obama again makes a deal with Republicans to win another piece of legislation he considers important, the present 35 percent rate is expected to survive until 2012 when the Obama-Republican tax deal expires.
Democrats will accuse Republicans of trying to legislate to benefit primarily the rich. Republicans will maintain that the estate tax will damage small businesses and farms. These number 65,000, according to a study for the conservative American Family Business Foundation. UFE says only about 100 would be affected.
To Mr. Jennings, the estate tax has the additional benefit of slowing a drift in the United States toward "a modern-day aristocracy."
Over three decades, wealth and income have been accumulating at the very top of the income scale while incomes for the middle class and poor have stagnated. He argues that those who have benefited most from the American economic system should contribute more to its maintenance.
Estate taxes are America's "most progressive" taxes, thereby "leaning against the concentration of wealth," says Joel Slemrod, an economist and tax expert at the University of Michigan Business School. He was one author of a 2001 study that found that the wealthy do tend to move to states with low estate taxes, such as Florida. But the drift is so small that it does not exceed the extra revenues that state estate taxes provide.
As for those baby boomer households, a study by the Center for Retirement Research at Boston College calculates that the two-thirds who can expect an inheritance will receive a median amount of $64,000. That's not enough to retire on.
•David R. Francis writes a weekly column.