I, for one, am just reeling about the possibility that the House may vote on legislation to extend current estate tax rates. Shocked. I mean, there are, what, four weeks left until the end of the year? That’s just crazy.
Tax professionals have just gotten comfortable with the idea that there’s no news on the federal estate tax front. We’ve grown used to thinking that nothing will change. Congress’ inability to act is kind of our Snuggie.
You see, when the current rules passed way back in 2001 as part of EGTRRA (Economic Growth and Tax Relief Reconciliation Act), we all chuckled. These, we thought, won’t stick around for long – especially that whole “federal estate tax repeal” bit for 2010. That’s because the rules for 2010, what with their carryover basis insanity, could just never happen. And that sunset provision which kicked the old rules back after a year of “repeal”? Just political suicide on both sides.
So it was going to be fixed. For real.
And then 2002 came and went.
And 2003.
And 2004.
And… well, you get the picture. We kept believing that Congress would do something, anything, one way or the other.
And here it is, the end of 2009, just days away from a year that, administratively, the IRS is far from prepared for – and we still got nothing.
So it was a bit surprising to not hear any kind of hoopla about the fact that a vote might happen next week on the federal estate tax legislation from Rep. Earl Pomeroy (D-ND). Except for the whole “even a yes vote means nothing” bit.
The Pomeroy bill is actually not bad – it would basically freeze the tax where it is now: a 45% top tax rate with a $3.5 million personal exemption. But there’s still squabbling to be had.
Dems say it could cost too much. Since the current legislation would actually reduce the exemption to $1 million and raise the top tax rate to 55% (as it was pre-2001), the Pomeroy bill would be considered a tax cut. The cost? $233 billion over the next 10 years.
The GOP says it’s not enough. They want either permanent repeal (read my lips: ain’t gonna happen any time soon) or a significant increase in the exemption, somewhere between $5-10 million.
Even if the Dems could push the bill through the House, there’s no way that they’ll get it through the Senate. But that doesn’t matter: there’s no word when (or if) the Senate would even consider a similar bill.
Finally, some consistency.
Thanks, taxgirl, this is interesting. It’s been such a climate of uncertainty in the Federal tax planning world. Given the current political climate, a lock-in at the $3.5 level and existing rate would be a victory for common sense.
TaxGirl,
You can’t be that shocked (disappointed yes, but shocked no). Estate taxes aren’t nearly as sexy as health care for all or the wars….so why fight for or against real reform?
Evan,
TaxGirl probably doesn’t want real reform. If the estate tax were repealed, (or any other tax for that matter) how would TaxGirl make any money? As long as the tax code is complex, we need tax accountants to help us understand it. Bureaucracy creates expertise, but there isn’t much that necessitates bureaucracy.
The estate tax isn’t sexy (that’s why Republicans started calling it the Death Tax), but the fact that repealing it would create 1.5 million jobs is a sexy secret that Democrats, in particular, don’t want you to know.
Boy, my comment has been awaiting moderation for quite some time. That doesn’t surprise me. The truth is difficult to swallow sometimes.
PolitiComm,
Just so you (and all other readers) know, when comments go into moderation, they have to be manually approved. Since I work full time as an attorney, I am not always available to immediately approve comments – I do them as soon as I can. This morning, I was teaching a CLE for the PA Bar and just got back to my laptop. I did, however, stop in at lunch and approve your comment.
I don’t usually block a comment unless it’s directly in conflict with my comment policy. In fact, I encourage dialogue on the blog – it’s what keeps it interesting!
PolitiComm,
Your comment illustrates exactly what folks don’t seem to *get* about the federal estate tax. It simply doesn’t affect most taxpayers which means that I am NOT making money with the estate tax. The exemption as it stands today is $7 million per married couple – there are not a whole lot of taxpayers out there filing those returns.
What IS a problem is the lack of a clear direction to point clients to… That actually keeps me much busier. 😉
PolitiComm,
No need to get hostile (your comment probably wouldn’t need moderation if your email addy or website addy wasn’t associated with the auto spam blockers Kelly probably uses).
While I agree there shouldn’t be an estate tax I am Curious, where you got the 1.5 million jobs created? Is that net of all the IRS agents and CPAs and Attorneys laid off?
That is the silliest thing I’ve read in a while. Thanks for the chuckle! (I assume I have AEI or something to thank by extension. Thank, AEI, for the light-hearted moment)
Anyhoo, a quick bill means fewer estate planning ornaments on the christmas tree of the imminent estate tax bill. Viz., we won’t see any action on GRATs, FLPs, or portability.
As you noted, the 2010 estate tax repeal comes with a horrible “got ya”. Just when you should be able to value everything upon death, that goes away, and you need to find cost basis for everything.
There has to be a happy medium. Even a $2.5M/person exemption would eliminate all but the top few percent of estates.
I have given much thought to this and if this tax is to end at the end of the year then that means I only have a few weeks to take care of my affairs before my departure. I have enjoyed my life and have worked hard to leave my children what has taken so long for me to obtain. I won’t let the government take that away – not from my children nor my grandchildren. This is not the America that I had thought it was. A land where hard work, and determination to suceed would pay off someday so that my children could have it a bit better than I did. I pray that there will be peace in this land, but because for the last two years things have strayed away from the foundation that our country was built on. And this country is all messed up.