Paul Whelan: Understanding the inheritance tax; the timely question is, really, who should pay and how

For federal tax purposes, an individual would have to leave an estate valued at more than $5.25 million for heirs to pay federal inheritance taxes.

For a married couple the estate would have to have a value of $10.9 million for heirs to pay federal estate taxes.

Inheritance taxes date back almost 3,000 years. As early as 700 B.C. in Egypt there appears to have been a 10 percent tax on the transfer of property at death.

In the 1st Century A.D., Roman Emperor Augustus Caesar imposed a tax on bequests to all but close relatives.

Inheritance taxes are used by the federal government to help pay for wars and federal infrastructure projects. State inheritance taxes are used by states to help keep property, sales and income taxes lower.

Funds generated by these taxes are used to support schools, colleges and other state infrastructure. Inheritance taxes have been imposed to pay for the Revolutionary War and other wars. To help pay for the Civil War, the Tax Act of 1862 imposed a federal inheritance tax.

State inheritance taxes are used by states to help keep property, sales and income taxes lower. Funds generated by these taxes are used to support schools, colleges and other state infrastructure.

Many states use inheritance taxes to keep property and sales taxes lower than in surrounding states. The state of Florida does have a property tax. As a result, the state of Florida’s department of state taxation admits that “Property taxes in Florida are some of the highest in the country”.

Some states are repealing inheritance and replacing that revenue with higher property and sales taxes.

It is argued that poor and middle-income earners are disproportionately affected by taxes and that wealthier people should have to pay a “fair” share which would include inheritance taxes.

A 2015 study from the Institute for Taxes and Economic Policy, those who make about $23,000 a year in Kentucky pay 10.6 percent of what they earn in state and local taxes primarily sales and property). Meanwhile those earning more than $840,000 — the top 1 percent of earners — pay 6 percent of their incomes in state and local taxes.

Ohio repealed the inheritance tax on individuals who died after January 1, 2013.

In Kentucky, Children, grandchildren, spouses, brothers, sisters and half-siblings don’t pay the state inheritance tax due to exemptions passed by the legislature in the 1990’s.

The Kentucky inheritance tax generated nearly $51 million in 2015 and is forecasted to bring in $46 million in 2016 and $47 million in 2017.

Legislators need to consider who is benefiting when faced with bills to repeal inheritance taxes. With the demand for maintaining and improving public infrastructure and services, is it fair to force significant increases in real estate taxes for small home owners and increase sales taxes on consumers to give heirs of more than $5.25 million estates a tax break?

Paul L. Whalen is an attorney from Ft Thomas who is licensed to practice in KY, OH, WV and the Federal Courts.