Block on Trump's Asylum Ban Upheld by Supreme Court
Now here is a drop dead date: even though the House of Representatives passed a bill on December 3rd to permanently extend this year's estate tax rates of 45% (with a $3.5 million exemption), if the Senate does not take up the legislation by Jan 1, the federal tax on inherited assets would disappear altogether in 2010. However, the estate tax would return with a vengeance in 2011, at much higher rates and lower exemptions. Cue the zombie music.
It is no laughing matter that the Bush administration left the estate tax laws in such a frightful mess. It appears Bush had hoped, after passing a 10 year phase-out of the tax, that a permanent repeal would be born before the return of 2001 tax levels in 2011. Unaccounted for in this plan was a small occurrence now known as the Great Recession, along with the equally great deficit, now lurching toward $12 trillion.
The mainstay argument by opponents of the estate tax is that it can siphon off much of the assets family owned small businesses or farms have accrued over a generation.
Unfortunately, statistics do not support this view. According to a study by the Urban Institute-Brookings Institution Tax Policy Center, only 100 small businesses and farm estates would owe any estate tax next year if the current rate and exemption is continued.
A few additional issues loom, the most menacing being this trick of the timeline. As we know, if Congress does not act by the Jan.1 deadline, the tax will disappear altogether in 2010, only to re-appear in 2011 at 2001 levels (55% rate, $675,000 exemption). The law's creation of a legal gap for the year of grace 2010 has policy wonks everywhere calling it the "throw mama from the train law." The year-long pause in the tax does seem to create a bit of an incentive for a wealthy and ailing relative to pass on some time during the calendar year. Talk about a death panel.