Market Place radio did a segment on the estate tax this morning and neglected to tell listeners that the tax is a marginal rate that only applies to the value of an estate above a cutoff. It also got the pre-Bush tax cut rate wrong.
Therefore when it told listeners that the estate tax will revert to the 2001 level next year if nothing is done, it likely left them hugely confused about the tax rate. The piece said that estates of more than $1 million would face a 55 percent tax rate. This would have led listeners to believe that an estate worth $1.1 million would face a tax liability of $605,000.
In fact, the first million would face no tax liability and the next $100,000 would be taxed at a 37 percent rate, making the total liability $37,000.