According to this morning’s Wall Street Journal (subscription required), the Senate is close to a compromise on reforming the estate tax. We have no details as yet on tax rates or effective dates, but the smallest exemption being discussed is $3 million.
There will undoubtedly be additional adjustments, such as elimination of carryover basis, perhaps an additional exemption for family owned businesses.
Reportedly the White House is holding out for total repeal, which is unlikely. According to the Journal, advocates of repeal in the House are likely to accept the compromise.
The target for passage is the end of summer, which means before the August recess (around the ERTA anniversary?). I put the chance of passage of a compromise by August at 75%, because according to Tax Notes the repeal wing is quite strong, strong enough to see that something happens. Yet the Democrats have proved tenacious enough in blocking certain judges and the Bolton nomination that there is no chance for a stand-alone estate tax repeal bill passing. If Kyl strikes a compromise, the Senate Republican leadership is likely to endorse it, and I doubt Bush would veto it.
If the estate tax is changed, Merrill Anderson will have marketing materials in response.
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4 comments:
Is it supposed to be Good News that Congress may vote to retain the estate tax (with a higher exemption) and also to repeal carryover basis?
Gosh, I can't wait to hear the Bad News.
Carryover basis repeal would be very good news indeed, because an entire system of allocating basis step ups and associated paperwork would be demolished. I think we can all agree on that.
As to the estate tax, perhaps abolition would be better, but that isn't one of the realistic choices. We are already retaining the estate tax, come 2011, at the high rates and low exemption levels of the last century. The current regime, reducing the death tax burden through 2009, eliminating it in 2010, then bringing it back, makes sound estate planning darn near impossible. Oh it may be good for estate planning lawyers, who can legitimately charge for annual will checkup. For everyone else, I do think eliminating the yo-yo will be good.
Minor side note: substituting a deduction for the state death tax credit has achieved death tax repeal in many states already. No sign of reversal on this point.
That verb "repeal" is what did me in. I was thinking of stepped-up basis, which is now scheduled to be replaced by carryover basis when the estate tax is repealed.
The notion that Congress could this year prospectively repeal a 2010 tax change was too complex for my elderly mind.
Got me thinking, though. Say Congress this year does vote to extend the estate tax in some form, in effect repealing the scheduled repeal.
What if the 2006 elections bring us a new Congress that feels more feisty about getting rid of the estate tax? Might it repeal the repeal of the repeal?
My mind boggles!
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