October 24, 2016
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Report: Estate Tax Burden Falls Disproportionately On Same-Sex Couples



New Study by Williams Institute Finds that Exclusion from the Estate Tax Marital Deduction Will Cost Affected Same-Sex Couples $3.3 Million on Average

LOS ANGELES, -- As Congress turns to address the estate tax before it is repealed at the end of the year, a new study announced today shows that same-sex couples who are affected by the estate tax are assessed an average of $3.3 million more in taxes upon the death of a spouse than similarly-situated different-sexed married couples. Because the federal government refuses to recognize same-sex marriages, lesbians and gay men are disadvantaged in their ability to pass on their wealth to their partners and children after their death.

The study, "Federal Estate Tax Disadvantages for Same-Sex Couples," was released by the Williams Institute at the UCLA School of Law and comes only a month after the organization released a report finding that the majority of same-sex couples have less retirement income than married different-sex couples. The new report shows that same-sex couples at the top end of the socioeconomic scale and those with small businesses are also hurt by inequalities in the federal law. Both reports were conducted with funding from Merrill Lynch Global Wealth Management.

"Even in 2010, when the estate tax is currently slated to be repealed, federal law allows different-sex married couples to shelter an additional $3 million in capital gains when a partner dies," said Michael D. Steinberger, the author of the study. "Regardless of your views about this tax, it is a costly implication of legal discrimination against gay and lesbian couples."

Other key findings of the report include:

  • The estate tax penalty will cost same-sex couples $237 million in 2009 and nearly $620 million in 2011, if the exclusion limit falls back to $1 million.
  • If current estate tax law is not changed, by 2011 the estate tax disadvantage will have cost same-sex couples more than $3.5 billion over the past decade.
  • The loss to federal tax revenue of equalizing the treatment of same-sex couples would be less than one twentieth of one percent (.05%) of total federal government revenue.

The study also notes that same-sex couples cannot avail themselves of the tax protections offered by the Special Use Valuation and Qualified Family-Owned Business Interest, which help a person in a married different-sex couple transfer a family farm or business to their children or to their spouse's children, even if the descendent was not the legal parent of the child. Lesbians or gay men must be the legal parents of a child in order to receive the same deduction.

"These penalties are huge for the individual families who must bear their burden and represent yet another economic disadvantage for same-sex couples with small businesses," said Steinberger. "As Congress turns to legislation in December to address the estate tax before it disappears in 2010, it should address these inequalities for same-sex couples and their families."

The full report is available at http://www.law.ucla.edu/williamsinstitute/home.html.

The Williams Institute advances sexual orientation law and public policy through rigorous, independent research and scholarship, and disseminates it to judges, legislators, policymakers, media and the public. A national think tank at UCLA Law, the Williams Institute produces high quality research with real-world relevance.


SOURCE Williams Institute

STORY TAGS: estate, tax, burden, same sex, married, marriage, civil, union, unions, couples, lbgt, lesbian, gay, homosexual, bisexual, transgender, minority, news, Federal Estate Tax Disadvantages for Same-Sex Couples

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