StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



House To Consider An Estate Tax Amendment

13 Dec 2010
Posted by Pete Davis

With this evening's 83-15 cloture vote, the Senate signaled it will pass President Obama's Bush tax cut compromise tomorrow afternoon or evening depending upon how much of the 30 hours for debate is used.  A top House staffer told me that one amendment on the estate tax will be considered when the House takes it up Wednesday afternoon or evening.  No details were offered, but I would guess we're talking about replacing the Lincoln-Kyl $5 million exemption and 35% top rate with the 2009 $3.5 million exemption and 45% top rate.  I'd be surprised if the Senate accepted that, so the question is how long will it take Congress to reach a compromise.  It's a tough call.  Most of my lobbyist friends expect the desire to get out of town will force final passage of the Senate version without the House amendment next weekend.  I'm not so sure.   Even if this Congress fails to reach a deal, the 112th Congress would pass the Senate version quickly after it convenes on January 5th.

Makes Sense

When I first heard of the tax deal, my first thought was, "why not just put the estate tax back to 2009 levels?" It seems to be the most logical approach. The Republican proposal of a $5/$10 million exemption with a 35% rate is just a giveaway to a small number (few thousand) of the wealthiest estates every year, with no real economic logic behind it.


The $5 million exemption does

The $5 million exemption does not particularly bother me, but I think 35% is too low. How about a $10 million/45% rate sound as a compromise. it is the lack of taxation of the massive estates, those above $100 million or so that lead doswn the path to fudalism. A ten million exemption would mean that lots of small businesses could be handed down to later generations, and those who bought houses 40 years ago, and or made a few very good bets in their 401K's would not be impacted, or are at least minimally impacted. At the $20 million level, a $5 million/35% results in a 26.25% effective rate, at $10 million/45% it results in a 22.5% rate. However at $100 million, $5/35% results in a 33.25% effective rate while a $10 million/45% rate gives an effective rate of 40.5%. This compromise would let the mearly affluent off the hook, while getting quite a bit of revenues from the plutocrats and preventing the rise of neo-fudalism.


Thanks, $3.0/$3.5 million level can be small, variable amount

THANKS for info. I very much hope they don't pass a limit to the estate tax that is that low, as if there are 4 or more children, that starts to get pretty low per child/grand children etc. Plus we all now know all too well how the prices of "assets" can absolutely tumble and so may well shrink, particularly as we may enter deflationary times in the short-term. Please keep us apprised re this.


Where can I sign up to join

Where can I sign up to join the "world's tiniest violin" brigade to play laments for these mythical children of millionaires that will ONLY get $500k+ apiece for their tremendous contribution of being formed by the right sperm?


For couples with more than $1M and less than $7.0M

A permanent $3.5 million exemption and 45% tax rate is better than a temporary $5 million exemption and 35% tax rate, because in the former case, it is possible to escape estate tax planning entirely, while in the latter case, it is still necessary to incur substantial transaction costs to prepare for the possibility that the more generous exemptions and rates will expire.




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