Preamble: To ensure fairness in the application of estate taxes, provide relief to moderately wealthy individuals, and maintain revenue generation to fund public services, this Act lowers the federal estate tax exemption threshold to $1 million while significantly reducing taxable rates. By restructuring the tax into a fair and tiered system, the Act ensures equity for estates of varying sizes while introducing targeted relief for small businesses, family farms, and a federally managed public trust option to democratize estate planning and reduce barriers for less wealthy individuals.
Section 1: Short Title
This Act shall be known as the "Equitable Estate Tax Reform Act of 2028."
Section 2: Purpose
The purpose of this Act is to:
1. Lower the federal estate tax exemption threshold to $1 million.
2. Reduce the taxable estate tax rates by three-quarters (75%) from current levels.
3. Create a fair, tiered tax rate structure to balance the financial impact on moderately wealthy and wealthy individuals.
4. Provide targeted relief for small businesses and family farms to ensure their continued operation and protect against liquidity challenges.
5. Establish a federally managed public trust option to offer an affordable and accessible estate planning mechanism for less wealthy individuals.
6. Contribute to deficit reduction and enhance funding for public services while ensuring economic equity and stability.
Section 3: Adjusted Exemption Threshold
1. Effective January 1, 2029, the federal estate tax shall apply to estates exceeding $1 million.
2. Estates below $1 million shall remain exempt from federal estate taxation.
Section 4: Revised Tax Rates
1. The taxable estate amounts and corresponding tax rates shall be as follows:
Taxable Estate Amount Tax Rate
Up to $1,000,000 0%
$1,000,001 - $2,500,000 4.5%
$2,500,001 - $5,000,000 7.5%
$5,000,001 - $10,000,000 11.25%
$10,000,001 - $25,000,000 15%
$25,000,001 - $50,000,000 18%
Over $50,000,000 22.5%
2. Estates opting into the federally managed public trust option shall pay tax rates at 50% of the corresponding tiered rates, as detailed in Section 6.
Section 5: Relief for Small Businesses and Family Farms
1. Additional Exemption:
o Estates primarily composed of small business or family farm assets are eligible for an additional $2 million exemption, bringing their total exemption threshold to $3 million.
2. Deferred Payment Options:
o Estates meeting the criteria for small businesses or family farms may elect to defer estate tax payments for up to 10 years at a reduced interest rate.
o Annual payments shall be based on the cash flow of the business or farm to ensure sustainability.
3. Liquidity Protection:
o Estates that demonstrate significant liquidity challenges tied to small businesses or family farms may qualify for a payment plan negotiated directly with the IRS.
Section 6: Federally Managed Public Trust Option
1. Public Trust Establishment:
o The federal government shall create a managed public trust system, allowing individuals to place estate funds and property into a federally managed trust.
2. Reduced Tax Rates:
o Estates using the public trust option shall be subject to tax rates at half the corresponding tiered rate. For example:
Taxable Estate Amount (Public Trust) Tax Rate
$1,000,001 - $2,500,000 2.25%
$2,500,001 - $5,000,000 3.75%
$5,000,001 - $10,000,000 5.625%
$10,000,001 - $25,000,000 7.5%
$25,000,001 - $50,000,000 9%
Over $50,000,000 11.25%
3. Administration:
o The trust shall be managed by the Treasury Department, which will ensure proper allocation of funds and provide annual reports to beneficiaries.
4. Accessibility:
o The public trust option is designed to provide an affordable alternative to private estate planning services, reducing barriers for less wealthy individuals.
Section 7: Indexing for Inflation
1. The $1 million exemption threshold and tiered tax brackets shall be adjusted annually for inflation, based on the Consumer Price Index (CPI).
Section 8: Payment and Compliance
1. Executors of estates subject to the federal estate tax shall:
o File Form 706 with the Internal Revenue Service (IRS) within nine months of the decedent’s death.
o Pay applicable taxes in accordance with the tiered structure, elect deferred payments under Section 5, or utilize the public trust option under Section 6.
2. Extensions for filing and payment may be granted as per IRS regulations.
Section 9: Revenue Allocation
1. Revenue generated through the revised estate tax shall:
o Support programs benefiting low- and middle-income families, such as education and healthcare.
o Contribute to reducing the federal deficit.
Section 10: Equitable Implementation
1. The IRS shall provide guidance and resources to assist executors in understanding and complying with the revised tax structure, relief provisions, and public trust options.
2. A dedicated helpline and online resources shall be established to answer questions and resolve disputes efficiently.
3. Independent audits shall be conducted annually to ensure transparency and efficiency in the public trust system.
Section 11: Effective Date
This Act shall take effect on January 1, 2029.
Conclusion: The Equitable Estate Tax Reform Act of 2028 ensures a fair distribution of tax responsibilities among estates of different sizes while maintaining critical revenue streams. By lowering rates and applying them progressively, introducing targeted relief for small businesses and family farms, and offering a federally managed public trust option, the Act seeks to balance economic equity, operational continuity, and fiscal sustainability.