The fight over taxing the wealthy has largely focused on income taxes. But there's another tax that's becoming the source of growing dispute in Washington: the estate tax.
The estate-tax rate is currently 35 percent on estates valued at $5 million or more. But if the United States goes over the fiscal cliff, the rate jumps to 55 percent. More importantly, the exemption drops from $5 million to $1 million – ensnaring tens of thousands of additional taxpayers in the tax.
So far, there is little agreement on a compromise. While Democrats and Republicans remain predictably far apart, division within the Democratic Party over the estate tax is also clouding any solution.
Hanging in the balance is hundreds of billions of dollars in tax revenue over the next 10 years, and the fates of some of America's largest fortunes. (Read more: Wealthy Dump Assets Amid 'Cliff' Worries)
It also has large symbolic value. The tax has been labeled "the death tax" by conservatives who say it hurts farms and small businesses. The left, meanwhile, says the tax is needed to prevent family fortunes in America from becoming too large and creating powerful dynasties.
The estate tax was among the largest but least noticed components of the Bush tax cuts. The rate has fallen steadily since 2001 – from 55 percent to its current rate of 35 percent. In 2010, there was no estate tax, leading to criticism that families of several billionaires inherited fortunes without paying any tax at all.