Academic

The estate tax and same-sex couples

By Tung Yin

The WSJ reports on a lawsuit challenging the federal Defense of Marriage Act, which has been brought by a woman who was legally married to her spouse in Canada, with such marriage recognized by the state of New York, but not the United States.  Result: when the spouse passed away in 2009, the estate incurred $350,000 in estate taxes.

"So the government taxed what I inherited from Thea as though we were strangers rather than spouses," Ms. Windsor said in prepared remarks at a press conference Tuesday. "I am 81 years old and live on a fixed income, and paying that tax was not easy for me. Even more distressing, the woman I had cared for and shared my life with for over 40 years was not my legal spouse in the eyes of the federal government."

As I've said before, I support same-sex marriage.  That a straight-couple would not have incurred the estate tax doesn't seem right.

But something about Ms. Windsor's statement doesn't make sense.  She says that paying the tax was not easy and that she's on a fixed income.  Yet, her spouse (Ms. Spyer)'s estate must have been quite large to generate $350,000 in estate taxes!  For 2009, the exemption amount was $3.5 million, and the tax rate was 45% on everything above that.  That means that Ms. Spyer's estate was probably worth something like $4.28 million.  Take out the $350,000 in taxes, and it's still close to $3 million that Ms. Windsor inherited.

Again, to be clear, it does not seem just that she had to pay that amount in the estate tax when an otherwise similarly situated male-female couple would not.  I understand and appreciate the indignity that she must feel.  But unless I'm missing something, I don't get the financial hardship angle in the public statement.

Full post as published by The Yin Blog on November 09, 2010 (boomark / email).