Repeal of the estate tax, a top priority of the Bush administration, doesn't stand a chance with Democrats in control of the House. But the prospects for legislation that would limit the tax to the super-wealthy are much improved, tax analysts say.
Less than 2% of taxpayers pay estate taxes. But for those who are affected, the tax rates are steep: up to 46% on estates that exceed $2 million. Under current law, the amount of assets exempt from estate tax will rise until 2010, when the estate tax will disappear.
Unless Congress acts, though, the estate tax will rise from the grave in 2011, the exemption will drop to $1 million, and the top rate will hit 60%. (This has led some financial planners to dub the 2001 statute the "Throw Momma From the Train Act," because heirs stand to gain the most if their benefactors die in 2010.)
While Democrats have opposed full repeal of the estate tax, many support increasing the exemption amount, says Clint Stretch, managing principal of tax policy at Deloitte Tax in Washington. Rep. Charles Rangel, the New York Democrat who's expected to chair the House Ways and Means Committee, favored estate tax reform as far back as 2001, Stretch notes. "Clearly, he would be supportive of a significant increase in the exemption amount."
Wednesday, November 08, 2006
Rumsfeld Out. Estate-Tax Reform In?
By winning control of the House of Representatives (and possibly the Senate), the Democrats sent at least one senior citizen, Don Rumsfeld, into retirement. Have they also brightened the prospects for estate-tax reform? That's the view offered in this USA Today article:
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3 comments:
The compromise you describe is already in the "Trifecta bill," which passed the House with bipartisan support. Are you suggesting that the Democrats might permit a vote on that bill in the Senate now that the Republicans can't claim credit for it during an election?
That's the only way I see any estate tax reform happening, because the Democrats have promised to bring back the pay-as-you-go budgeting. There's no way to offset the high revenue costs of increasing the amount exempt from the federal estate tax.
The ugly truth is that the rich don't pay the estate tax any more than they pay the Alternative Minimum Tax. A meaningful increase in the amount exempt from federal estate tax lowers the revenue so much that it's hardly worth the expense of collecting the balance.
Plus, the serious money, the Gates and Buffett money, is completely free from the federal estate tax due to the unlimited charitable deduction, a loophole that these billionaires have greedily embraced even as they lobby to retain the death tax for everyone else.
You c-a-a-n't be serious!
"I'm from the government, Mr. Gates, and we want the billions from your estate because we can spend all that money more wisely and usefully than your private charitable foundation can."
That rumbling sound from the West is Ronald Reagan, turning over in his grave.
As it turns out, I don't think that very many charitable foundations are spending their money more wisely the the feds do. This is about control of the money, and both Gates and Buffett have figured out a way to keep that control and never pay taxes. I, on the other hand, am left paying the taxes that they skip, plus I don't get control over the spending.
To me, that may be just too great a reward for massive wealth. If they don't have to pay death taxes, I don't want to either, and it shouldn't be a function of whether I've dedicated my wealth to a politically correct purpose or not.
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