Final answer:
The estate tax is a levy on inherited wealth that takes into account the fair market value of assets less any exemptions, which have evolved over time. It affects only a tiny fraction of the wealthiest, with exemptions increasing from $5.34 million in 2014 to $12.06 million in 2022. The 2013 United States v. Windsor Supreme Court case played a key role in ensuring equity within estate tax exemptions among married couples, regardless of sexual orientation.
Step-by-step explanation:
The subject in question refers to the estate tax, which is a tax levied on the value of an individual's inheritance, including investments, property, and bank accounts, upon their death. The estate tax is contingent on the fair market value of these assets minus any applicable exemptions.
As of 2014, an exemption of $5.34 million was allowed, meaning that estates valued below this threshold were not subject to the estate tax. However, it is worth noting that these figures are subject to change due to legislation alterations over time. In 2015, for instance, the exemption rose to $5.43 million, and by 2022, it increased to $12.06 million, impacting a very small portion of high-wealth individuals.
One particularly notable case related to the estate tax exemption for surviving spouses involved United States v. Windsor in 2013. The Supreme Court found the Defense of Marriage Act (DOMA) to be unconstitutional, thus recognizing the same federal estate tax exemption rights for same-sex married couples as for heterosexual couples.
The complexities of estate tax calculations and exemptions highlight the ongoing debates around wealth distribution, fairness, and economic incentives. Such tax policies aim to strike a balance between limiting the transfer of enormous wealth to subsequent generations and avoiding disincentives for economic growth and productivity.