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How much impact can estate taxes potentially be for Singapore? Data from the US says it might be much muted.

Singapore has steered away from estate taxes since the law change in 2008 but we are observing more talk of wealth taxes, property capital gains taxes and estate taxes.

So how effective is it to declare an estate tax and see meaningful inflows?

Data from the Internal Revenue Service (IRS) in the US provides some insights. It also provides some data points on how rich America’s rich are.

The modern estate tax was introduced in 1916 to help counter the growth of dynastic wealth.

  • In 2018, the IRS collected more than $20 billion in estate tax from nearly 5,500 families
  • In 2020, the IRS collected $9.3 billion in estate tax from 1,275 wealthy families

That is a dramatic fall of nearly 50% in the collection and a 77% fall in the number of wealthy households taxed.

Eventually, only 0.04% of dying Americans paid estate taxes.

IRS attributes this greatly to the tax overhaul enacted by Republicans in the 2017 Tax Change (the last change was in 1986). In this tax overhaul, the amount the wealthy can pass to heirs without triggering a levy was doubled.

Now that the tax is slightly less than $10 billion, estate tax represents 0.25% of the US$4 trillion tax collection in the last fiscal year.

Here are some other data:

  1. Last 5 years, US billionaires have doubled their collective net worth to $5 trillion (Bloomberg Billionaires Index)
  2. More than 20% of the estate-tax payers lived in California, 13% in Florida, 9% in New York, 6% in Texas

The general tax avoidance technique centres around how much wealth can be transferred out of the estate. With the Tax Cut and Jobs Act change in 2017, married couples can now transfer $23.4 million over their lifetimes tax-free.

$9 billion is a big sum but for a wealthy country like America, that is probably not good enough.

This is something for implementers such as Singapore to think about. I think California will face a more wealthy exodus to places like Texas and in the future, this may be reduced further.

If they find it so tough to extract money out of Americans, how easy would it be to extract from overseas people?

You can read more at Financial Advisor: Ultra-Rich Skip Estate Tax And Spark A 50% Collapse In IRS Revenue

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Monday 29th of November 2021

Hi Kyith, Does this 2017 tax change apply to the Singapore tax resident passing to heirs without trigger levy?


Tuesday 30th of November 2021

that will depend on your specific situation. there may be some intricate exemption or grandfathering for people before a certain period.

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