Question

In 2017, there is a move to repeal the estate and gift tax. This tax, which impacts families with asset transfers exceeding $22 Million, impact few families in the U.S. Select an article from the CSU-Global Campus Library to discuss why so many people, who are not even impacted by this tax, strongly oppose it. Provide an example from your research on a case (different from your peers) regarding death or gift taxes and provide an analysis of the outcome of the case.

Answer 1

In 2017, CSU-Global commissioned a third-party economic impact study to measure the return-on-investment (ROI) of a CSU-Global education, as well as state and national indirect economic contributions made by graduates.

THE ECONOMIC IMPACT OF CSU-GLOBAL

While taking courses at the university, students receive education and training, providing them with skills that allow them to increase their productivity and command a higher wage. Each year a new cohort of CSU-Global students enters or re-enters the workforce, expanding the stock of CSU-Global skills that have been accumulating in the state since the university first started serving students. The increased productivity that occurs in the workforce as the university’s students apply their newly-acquired skills to their jobs boosts the competitiveness of Colorado industries, as the employers of CSU-Global’s students enjoy the fruits of this increased productivity in the form of higher profits. The business community as a whole benefits from the increased spending that occurs across the state. During the analysis year, past and present students of CSU-Global generated $16 million in added income for the state. This $16 million in added income is equivalent to supporting 196 jobs. Table 1 lists the top industries impacted by the $16 million in added income. These are determined by the industries employing CSU-Global alumni and the associated multiplier effects as the alumni and their employers spend more. For example, CSU-Global alumni and associated multiplier effects supported 28 jobs in the Professional & Technical Services industry sector.

TAXPAYER BENEFITS

Benefits to taxpayers consist primarily of taxes that the government will collect from the added revenue created in the state. As CSU-Global students earn more, they will make higher tax payments. Employers will also make higher tax payments as they increase their output and purchase more supplies and services. By the end of the FY 2015-16 students’ working careers, the state government will have collected a present value of $54.5 million in added taxes. Benefits to taxpayers also consist of the savings generated by the improved lifestyles of students and the proportionally reduced government expenditures. Education is statistically correlated with a variety of lifestyle changes that generate taxpayer savings across three main categories: 1) health, 2) crime, and 3) unemployment. Improved health habits lower the students’ demand for national health care services. Students are also less likely to commit crimes, so the demand for law enforcement and criminal justice services is reduced (study references are available in the main report). Students are also more employable, so the demand for welfare and unemployment benefits, such as earnings assistance and welfare benefits, is reduced. For a list of study references to these statistical benefits, please contact the university for a copy of the main report. All of these benefits will generate a present value of $26.6 million in savings to state taxpayers. Total benefits to taxpayers equal $81.1 million, equal to the sum of the added taxes and public sector savings.

The Tax Cuts and Jobs Act of 2017 (the act), which was signed into law on Dec. 22, 2017, made substantial changes to the Internal Revenue Code, most of which went into effect on Jan. 1. One significant result of the passage of the act is the doubling of the exemption amount for the federal estate, gift and generation-skipping transfer taxes.

Beginning in 2018, the exemption for federal estate, gift and generation-skipping taxes, for tax years 2018 through 2025, increases from a $5 million base, set in 2011, to a new $10 million base. As was previously the case, the $10 million base is to be annually adjusted for inflation. Thus, after taking into account the inflation index, in 2018, the exemption will be approximately $11.2 million (or $22.4 million for a married couple, when taking into account portability). Before the passage of the act, such exemptions were set to be $5.6 million (or $11.2 million for a married couple) in 2018. By doubling the exemption, each person has been given the opportunity to give away (during life or at death) a cumulative total of $11.2 million without incurring any federal gift or estate tax. This means a married couple may together give away, gift and estate tax free, a total of $22.4 million. To the extent that assets are gifted (or remain at death) in excess of these exemption amounts, there would be a federal gift (or estate) tax imposed at the rate of 40 percent (the rate of tax is unchanged by the act).