Thursday, July 27, 2006

Another PETRA update

Tax Notes Today ($) reports that estate tax reform has been removed from the pension legislation, and so has the "extenders bill" that was severed from the May legislation that added two years to the low rates for dividends and long-term gains. The two items from the extenders bill that always get mentioned are the deduction for sales tax (instead of state income tax), and the r&d credit. These, and a few other business items, are thought to be "must haves."

So the current thinking is that the relatively uncontroversial extenders bill will be paired with the estate tax reform, and maybe that will be enough for 60 senators.

House Speaker Hastert announced that the House will vote this week on a new bill that combines the extenders and the estate tax reform into a single package. According to the report, this time the link to the capital gains tax rate will be broken, and the top tax rate will be set at 30%.

The big problem with estate tax reform is that, though Congressmen say they only want to tax those with more than $10 million, those people don't pay most of the estate tax. The reform proposal "costs" 70% or more of what complete repeal costs. Once you remove that much revenue, the rationale for the expense of an estate-tax collections infrastructure becomes tricky.

1 comment:

JLM said...

"Plays together nicely" does not seem to describe Congressional Republicans fretting about the estate-tax bill, judging by an item in today's WSJ:

"House Republicans who favor removal of the [tax] extenders from the pension bill said a deal is still possible, but boycotted last night's session. Finance Chairman Charles Grassley (R., Iowa) accused them of being afraid to vote against the extenders. In a blistering speech, Mr. Grassley said that the whole estate-tax bill was 'chancy' and that the strategy violated past promises made to him -- and promises he had made based on those understandings. 'When my credibility is abused and used I resent it,' he said."