At least for now, death will not be a taxable event in 2010
Democrats in Congress have been scrambling to keep the scheduled change in estate tax law from taking effect on January 1, 2010. As it stands, the estate tax is due to be repealed as of the first of the new year. The tax will disappear entirely and then reappear in 2011 at an increased rate of 55 percent with a mere $1 million exclusion. Democrats have been determined to keep that from happening, estimating that it will mean a loss of revenue of about $25 billion. Recently the Democrat-led House voted to overturn the repeal and, instead, make permanent the estate tax rate in effect for 2009 – which is 45 percent, with the $3.5 million exclusion. "Yes" votes totaled 225. "No" votes, which included all Republicans and 26 Democrats, totaled 200. Unfortunately, House Democrats will have to wait to know if the Senate will back them up on this largely partisan vote, as the issue has been tabled until sometime next year.
This delay means that, as of January 1, the estate tax will disappear as planned. But Democrats are expected to return to their campaign to reinstate the estate tax as soon as possible. After Republicans rejected the Democrats' efforts to extend the current rate for three months, Senate Finance Committee Chairman Max Baucus (D-Montana) made a statement from the Senate floor.
"Clearly the correct public policy is to achieve continuity with respect to the estate tax. We'll clearly work to do this retroactively."
Republicans have taken the position that they would prefer to let the estate tax be repealed. Rep. Dave Camp, (R-MI), who is the top Republican on the House Ways and Means Committee, summarized the party position simply by saying, "Death should not be a taxable event." The GOP takes the position that estate tax punishes distressed farmers and business owners.
Senate Minority Leader, Mitch McConnell (R- KY) explained GOP opposition this way: "There's nothing that outrages the American people more than the thought they will have to visit the IRS and the undertaker on the same day."
Democrats, on the other hand, claim that Republicans only want to protect the wealthiest Americans from income taxes. Many Democrats have lobbied to for estate tax rates go even higher and the exclusion lower. Before 2001, the rate was 55 percent with a $1 million exclusion. Democrats say that was not only fair, but a good revenue builder.
To support their position that the estate tax has been too low, Democrats estimate that if the current rate of 45 percent is made permanent, it will cost the government $234 billion in revenue over ten years. With the exclusion set at $3.5 million per individual ($7 million for married couples) only .23 percent of all estates are affected, according to the Tax Policy Center think tank.
"Abolishing the estate tax would add billions and billions to our deficit -- and while a small number of wealthy families would benefit, the growth of our economy as a whole would suffer," said House Majority Leader Steny H. Hoyer(D-MD).
Why the delay in voting on this issue? The determination of Democrats to push through health care reform before year-end has made it necessary to move the focus away from estate taxes for the time being. However, it's also unclear at this point whether they have the necessary 60 votes to support making the current estate tax rate permanent or to raise it even higher. Still, it appears the matter will be readdressed soon after the new year and the likelihood exists that death will not only once again be a taxable event, but those who pass away before the vote will be taxed retroactively.
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1 week 23 hours ago by claudilocks