Wealth, Mobility, Inheritance And The Estate Tax
Table of Contents
Recent Legislative Action
On June 9, the U.S. House of Representatives voted 279 to 156 in favor of H.R. 8, which would abolish the estate and gift tax after 2010. At that time, a carryover basis regime will be instituted, requiring heirs to pay capital gains taxes on sales of inherited assets from the date of original acquisition. In other words, the step-up of capital gains at death will also be abolished.
"Supporters of repeal may conclude that some relief is better than none."
Prospects in the Senate are uncertain. President Clinton has vowed to veto the repeal legislation should it pass both the House and Senate. Also, the shortness of the legislative calendar and the probability of a filibuster in the Senate may make it impossible to complete action on estate tax repeal this year.
Attention is now becoming focused on a compromise offered by Representative Charles Rangel (D-N.Y.), ranking Democrat on the House Ways and Means Committee. His legislation would do the following:
- Cut all estate tax rates by 20 percent across the board. This would lower the top rate from 55 percent to 44 percent.
- Increase the estate tax exemption immediately by $150,000. This would raise the exemption from $675,000 to $825,000.
- Raise the special estate tax exemption for farms and closely held businesses from $1.3 million to $4 million.
President Clinton has indicated a willingness to sign legislation along these lines. Supporters of repeal may conclude that something is better than nothing, and may in the end support something like the Rangel substitute in the Senate.