Estate Tax Opponents Shift Strategy

The Huffington Post heralds "An Estate Tax Victory By Any Other Name".  Contributor Chuck Collins advises that the richest (billionaires, not mere millionaires) families in America have recently changed their strategy from calling for the death of the so-called "death tax" to the reducing the impact of the same.

The federal estate tax effects less than 2% of estates nationwide.  However, Collins reports that "Wealthy families, including 18 dynastic families such as heirs to the Mars candy family fortune, had spent millions in lobbying funds to save billions in future taxes."   Now, they have apparently changed this mission statement to their lobbyist not to "kill the death tax" but to mitigate its impact.

I understand how the estate tax seems categorically unfair.  However, it bears reminding that the estate tax stands in lieu of the capital gain tax when a person dies. When you die, you may have assets that have increased in value between when you bought them and when you died.  For example, you bought stock in Acme, Inc. at $10 a share and it is now $100 a share.  If you sell that stock, during your lifetime, you owe capital gains tax on the gain of $90.  

However, due to Section 1014 of the Internal Revenue Code, when you heirs sell that same inherited stock, their cost basis is $100 (the tax basis is "stepped-up" to the date of death value, and all that appreciation during your lifetime disappears, as does the governments opportunity to tax it.  

The cost for the the "magic wand'? - the existence of an estate tax that taxes your assets at death (assuming you have more than $3.5 million from a federal estate tax perspective).  The kicker is that capital gains tax rates are 15% presently, and estate tax rates 45%, so perhaps it is the rates that need to be looked at, not the existence of the tax.