This week, the death of George Steinbrenner rekindled discussions about the federal estate tax. As you may be aware, there is no federal estate tax for 2010. However, assuming that Congress doesn’t take action, next year the federal estate tax returns with a personal exemption of $1 million and a flat rate of 55%.
Under the current Kyl-Lincoln proposal, the exemption would be increased to $3.5 million (indexed for inflation) with a flat rate of 35%. A prior proposal would have increased the exemption to $10 million. Yet another proposal has suggested a complete repeal. With so many proposals floating about (though none completely seriously, it seems), there’s no clear direction.
That brings us to this week’s Fix the Tax Code Friday question:
The 2010 rules are a nightmare but I think it’s too late for a retroactive change to the law in place for 2009.
I want Congress to realize this is an important tax that should apply permanently. Set an exemption, $2 million, $3.5 million, $5 million – I don’t care just come up with an amount. The tax rate can be the same as 2009 or a flat percent like 35%. Just fix it and forget it!
Going back to the 2001 rules helps states like California that only received estate tax money based on the state death tax credit – California needs the money so I’m all for it as a CA taxpayer but it’s not a necessary component; permanency is.
I agree that the estate tax needs a permanent fix. This is an important source of income that comes primarily on the gain of assets which have never been taxed and only those assets from the very wealthiest in our society — those who have benefitted the most from the opportunities offered by our society. I would propose a base of $2 million and tie the tax rate to the highest individual rate with an increase for inflation equal to the Social Security COLA. I would also index the AMT exemption and the minimum wage with the same COLA. What’s good for the goose is good for the gander.
The website http://www.faireconomy.org gives good information on the purpose for the estate tax and the powers behind the opposition to it.
I am in favor of zero estate tax.
The money was taxed when earned, income on it was taxed, etc. The current law isn’t zero completely, the gain beyond on certain amount is not stepped up, creating a future tax nightmare upon sale.
Short of elimination, I say fix the exclusion, $2M, $3M whatever, then adjust for inflation. Just like the AMT got away from us, and they’ve been patching ever since, the estate tax needs to be turned into a solid number and not the ups and downs we see now. This does nothing but keep trust attorneys in business. Not to mention those selling insurance to pay the tax.
The estate tax is one of my favorite taxes. It’s reasonable to adjust the exemption periodically for inflation. Maybe they could make the rate progressive instead of a flat percentage.
Repeal the estate, gift and GST taxes permanently. Repeal the income tax exclusion for gifts and inheritances (with some exclusions for small gifts and inheritances corresponding to say the current gift tax exclusions and certain dollar amount exclusion on inheritances). Cash and marketable securities taxed as income when received. Hard to value assets are not currently taxed but received with an income tax basis of zero, so recipient will pay capital gains tax on entire amount when sold.
Advantages: No expensive appraisals on death. No having to sell family farms and closely held businesses to pay the tax. The tax advantage of excessive deferral can be counteracted with a capital gains surtax on the sale of inherited assets.