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  • Congress Purposely Dragging its Feet on Death Tax

    Recent developments in Congress now make clear that Congressional leadership is willing to go through all of 2010 without a death tax in order to get what they have wanted all along – a death tax with a rate and exemption amount at their levels prior to the 2001 and 2003 tax cuts.

    According to an article in today’s Tax Notes (subscription required):

    Senate Finance Committee ranking minority member Chuck Grassley, R-Iowa, blamed Senate Majority Leader Harry Reid, D-Nev., on June 2 for the uncertainty about the future of the estate tax…Grassley said in a conference call with reporters that “Reid will not really give a clear direction” about his position on the estate tax… “The Finance Committee would like to take up consideration of [Kyl's] legislation, but we aren’t assured by the majority leader that the bill passed out of committee would be taken up on the floor,” Grassley said.

    Such delaying tactics are no accident and are likely part of a larger strategy by Congressional leadership to put off any action on the death tax this year.

    The death tax has been dormant since the beginning of 2010. A one year expiration of the death tax in 2010 was the culmination of a Congressional policy of phasing down the rate, raising the portion of estates exempt from taxation, and ultimately repealing the tax that began in 2001. Unfortunately for taxpayers, because of budgetary quirks the death tax comes back to life at its rate and exemption level prior to 2001 (55 percent with a $1 million exemption).

    All year long Congress has haggled over what to do about the death tax. In December 2009 the House of Representatives passed a bill that would have permanently extended the death tax at a 45 percent rate with a $3.5 million exemption. The Senate failed to act on that bill and still has not done anything in regard to the death tax. This has left countless families that have lost loved ones this year in the lurch as they await Congressional action to find out how much death tax they owe. And it has made planning almost impossible for other families anticipating the loss of a family member in future years.

    While Congressional inaction on the death tax is infuriating for families and estate tax planners, doing nothing this year has likely been the plan of Congressional leadership all along. If Congress does nothing, the rate kicks back up to the exorbitantly high 55 percent rate and relatively low $1 million exemption level on January 1, 2011. Even though they have to accept no death tax this year, Congressional leadership is willing to swallow what is a bitter pill for them to get back to a death tax that impacts many more families and hits them with a punitively high rate. And to get what they want all they have to do is continue to drag their heels as Majority Leader Reid is doing in the Senate.

    The death tax is a serious drag on the economy and ultimately hits family-owned businesses hardest. Repealing it would create 1.5 million jobs. It is long past time for Congressional leadership to stop playing games and get to work repealing this harmful tax.


    Posted in Economics [slideshow_deploy]

    10 Responses to Congress Purposely Dragging its Feet on Death Tax

    1. Dan, Boston says:

      Why now, with two very expensive wars, an economic depression, and a record deficit, would anyone think about ending the estate tax? Do the richest Americans really need yet another break? Our nation is on the precipice of a grave fiscal decline, yet some politicians want to lower an estate tax that only applies to millionaires – less than one percent of all estates. The estate tax raises tens of billions of dollars in revenue every year from those Americans who benefit the most from the prosperity and opportunity this nation represents.

      The wealthy provide much for our economy, but lowering or repealing the estate tax in order to shift their fair share of our national burden onto the middle class is entirely irresponsible. Nobody should be loosening their belt when our national debt is in the tens of trillions, particularly not people whose fortunes provide them lifetimes of financial comfort.

      United for a Fair Economy is an organization that shares my views. They demand a strong estate tax for the benefit of all Americans. Check them out at http://www.faireconomy.org/estatetax/

    2. Pingback: » Financial News Update – 06/04/10 NoisyRoom.net: The Progressive Hunter

    3. Greg, Dallas says:

      I guess Dan can only regurgitate leftist talking points. As the article stated, the death tax hurts small businesses. Besides, history proves that cutting taxes INCREASES government revenue. I'm more concerned about creating more and better jobs (what small business does) than about some government bureaucrat's obscene pension.

      What we really need is not more taxes, it is a SMALLER budget.

    4. Pingback: Congress Purposely Dragging its Feet on Death Tax « Faulk For Congress

    5. Vicki, Virgina says:

      As someone trying to administer an estate in 2010, I just wish that Congress would make it clear to the IRS if they intend to do anything this year or not! IRS will not issue forms for any returns or guidance due to the pending discussion. We cannot close out our estate until we can assure the courts that any and all Federal, State, and Local taxes have been paid. The longer this drags out in Congress, the longer we have to hold the estate open, with court accounting/filing costs growing due to the delay. Additionally, since we do not know if we will be getting a stepped up basis or not, we are not able to make appropriate decisions about whether to sell off or hold assets. Please, just decide one way or the other so that we can know how to proceed with informed decision making!

    6. Zachary Santini says:

      If you believe the Estate Tax applies to millionaires only, beware. My father's estate was wantonly mulcted by the IRS who imputed exorbitant valuations to phantom "assets" which never materialized. In effect, enormous taxes were assessed–and paid– on a non-entity…

    7. John, Marblehead MA says:

      I am 62 years old. I have had a career of risking money to start new companies which have constructed factories costing $100 million or more each and employed, in total, about 2000 people. I have the prospect of one more such project presently and will reach a "point of no return" decision early next year. Since I already have all the wealth I could use, I am concerned only for my heirs. There is no point in my risking some of my assets if any gain will be taxed first 28% by capital gains tax and then 55% as federal estate tax plus 8% (net) as state estate tax. That would mean that my heirs would see 27% of what I might make and 73% would go to taxes. I would elect in such an environment to go sailing, biking or take up a new hobby.

      As of 1/1/2011, the public policy of our country will be to discourage people such as myself from pursuing their lifelong missions of starting businesses, creating employment, creating a demand for materials and providing products desired by society. In a free economy, people generally act in rational and predictable ways. If the government takes 73% of the return one might make on any investment then most potential investments will simply not be made. I think most people would agree that if the tax on investment returns were 100% then no investments would be made at all–73% is not very far from 100%.

    8. Seth says:

      This infuriates me!!! How dare the government double tax…that is essentially what is going on…a person is taxed to death their whole life only to be raped one more time when they day…I am getting so seriously frucking tired of the US…property tax's, income tax's, sales tax's…time for a revolution…time for the gov to learn how to balance the budget on half the money. We are ruled by idiots!

    9. Mark, Columbus Ohio says:

      Dan, what we never hear from people like you is how much is too much? Your so called 'rich' already pay most of the federal and state taxes and you know that already. So how much Dan, how much is too much or is there no limit.

      Here is the deal Dan, I now go longer without buying a new car, I cut my own grass now, etc. Simply put Dan, I spend less because people like you are taking more. Tell me how that helps the economy Dan? Facts Dan, Facts.

    10. Tyler, Nebraska says:

      First off I am anything but rich, but my lively-hood is going to be snubbed out if the death tax goes to 55%. Everyone really forgets about agriculture (Dan) when this is brought up in conversation. I make less than 24k a year I have a one year old daughter a wife insurance (I pay of myself thank you) and a way of living that I truly love. In Ag you don't really have to be that rich or big of an operation to amass 3 million dollars in assets (with land, cattle, machinery and equipment) and for me to pay off a 1.5+ million dollars in taxes would make the rest of my life debt stricken considering I make less than 24K so you tell me sense the democrats and left leaning socialist play on emotion and how everything has to be fair. Do you really want my one year old daughter to be put out with no home no food no place to go just so the grand old government can have the money that they have already taxed 2 other time before I have to pay them again. Oh and for everyone that says there are exceptions to people in Ag maybe a few but try dividing that 1 million dollar exemption between 6 other siblings and lets see where that gets you. And the deferments of 5 year and installments of 10 year just puts 15 more year of interest on 1.5+ million dollars I know you may have a mortgage on your house but probably not in those dollar amounts.

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