I am waiting to see if my Internet ordered trust is sent to me before making any more posts on that topic. While waiting, I want to write again about the estate tax.
In 2001, the Republicans finally “won” their 30 year battle to repeal the estate tax, in a way that only a Congressperson could have dreamed of. The exemption, that is the amount a person could own at their death went up from $600,000 in 2000 to $3,500,000 in 2009. The rate, that is the amount the government taxed over the exemption went from a marginal rate of 55%+ to 45% in 2009. Then in 2010, the Estate Tax would be finally repealed for once and for all!
That is until 2011, when the 2001 exemption of $1,000,000 and rate of 55% kicks back in. This was done for various budgetary and political reasons. In 2001 there was no one who thought that we’d be here in 2009 and not have a “fix.” In 2005 there was hardly anyone who thought that.
But here we are. After 9/11 and the Iraq War and the run up in the economy and the economic collapse and the Democratic takeover of Congress and the White House, we are still scheduled to have no estate tax next year and then a lower exemption and a higher rate the year after that. (For an excellent read on the history of the battle against the Estate Tax, pick up a copy of Death By a Thousand Cuts: The Fight Over Taxing Inherited Wealth by Michael Graetz and Ian Shapiro).
As an Estate Planner, I hate the situation we’re in. My job is to plan, which can be very difficult if I have no idea what the rules are going to be less than a year from now. I’ve long thought that Congress was just going to take the 2009 rules and extend them.
Now, according to the Wall Street Journal, Republican Senator Charles Grassley, a longtime opponent of the Estate Tax seems to think that things look pretty good for Estate Tax Opponents.
“If Republicans stick together, we can do better than $3.5 million and a 45% tax rate,” Grassley told reporters after his speech. “Maybe not a whole lot better, but we ought to be able to do a little bit better.”
He said Republicans could press for an exemption closer to $5 million or $6 million, and a tax rate closer to 35%.
Grassley said Democrats will be eager to avoid having the tax go to zero on Jan. 1, 2010, only to have to reverse that by reinstituting it through legislation later. Republicans should be able to exploit that urgency to press for better terms, he said.
“This is where Republicans have got some leverage, it seems to me,” said Grassley.
Democratic-written budget blueprints unveiled in the House and Senate on Wednesday include authority to freeze 2009 estate tax levels through 2014, at a cost of about $72 billion.
Rep. Richard Neal, D-Mass., told reporters after the same tax conference Wednesday that the House was likely to consider an estate tax fix this year that is shorter than five years, in order to reduce costs.
For more, see Sen. Grassley Says GOP Will Have Clout On Estate Tax Fix.