I don’t think I’ve taken a posistion on this blog pro or con as to whether the estate tax should be repealed. I have clients who have taxable estates and I have clients without taxable estates. As planning for the estate tax is only a part of what I do, I’ll be able to continue to help my clients protect and provide for their loved ones after their deaths, whether the estate tax exists or not. As to the politics of it, well, because of what I do, I can certainly see both sides of the issue.
As I write this, today is November 30, and we still don’t know what is happening with the estate tax next year. If you are unfamiliar with the status of the Estate Tax, check out my August 26 post. However, here are the CliffsNotes:
The Lifetime Exemption, that is the amount that you can own when you die without being subject to the estate tax is currently $3.5 million. Any amount over that is taxed at a rate of 45%. Pursuant to a law passed in 2001, on January 1, 2010 the estate tax goes away for one year only.
Pursuant to that same law (passed by a majority Republican Congress and Republican President Bush), on January 1, 2011, the lifetime exemption, that is the amount you can own before you are subject to the estate tax goes to $1 million, and the rate goes to 55%. All of this — the one year only repeal, and the reinstating of the estate tax at a much lower threshold with a much higher rate happens automatically.
If Congress does nothing it will happen.
Naturally, a situation in which there is no estate tax for one year only, and the following year in which there is a significantly higher estate tax is untenable. Congress is –finally– working on a solution. The solution that might be voted on this week was submitted by Congressman Earl Pomeroy (D- North Dakota) which would permanantly set the exemption at $3.5 million and the rate at 45%.
Which brings me to the Heritage Foundation.
On their blog, known as The Foundry, author Curtis Dubay writes the following story:
In his post he writes, “The bill it will consider, sponsored by Rep. Earl Pomeroy (D-North Dakota), would extend permanently the death tax at its current 45 percent rate and $3.5 million exemption. This extension would be a drastic tax increase since the death tax expires on January 1, 2010.” (emphasis added).
That’s just wrong. I would like to give Mr. Dubay the benefit of the doubt, but if you go to his post, and click in the link in his post to the Dow Jones Newswires Story on the subject, the very article he links to says “The Pomeroy legislation, backed by President Obama, would cost $233 billion over the next 10 years since it represents a tax cut when compared to current law” (emphasis added by me).
Read that again. Despite the “one year repeal,” the House will be voting to lower the estate tax and not raise it.
Of course, I wonder how many of the Foundry readers will actually investigate these facts themselves. I’m all for a healthy debate, but let’s keep it honest please.