The Walking Death Tax
December 7, 2010
Without action in the lame duck Congress, the estate tax will rise from the dead on January 1 with a vengeance, the rate climbing back to 55 percent from zero this year. The exemption amount will revert to a miserly $1 million, unindexed for inflation, so more middle class taxpayers will get hit year after year, says the Wall Street Journal.
President Obama and Congressional Democrats don't think this is a high priority, but voters do.
- A November Gallup Poll found that Americans think that keeping the estate tax "from increasingly significantly" is "very important" by 56 percent to 17 percent "not too important."
- That's more than think it is a priority to extend current tax rates (50 percent), extend jobless benefits (48 percent) or ratify the START treaty (40 percent).
Mr. Obama, who professes to care about small businesses and jobs, should pay attention to new estimates by the Joint Committee on Taxation.
- The committee finds that reverting to the 55 percent rate with a $1 million exemption will tax roughly 10 times more small businesses and farms than would Sen. Jon Kyl's proposal of a 35 percent rate with a $5 million deduction.
- A recent study by Douglas Holtz-Eakin, the former director of the Congressional Budget Office, finds that the estate tax reduces savings and capital formation and forces family businesses to liquidate at the time of an owner's death, which puts hundreds of thousands of jobs in peril.
As for the deficit, Congress could give relief to families and enhance revenue collections by lowering the gift tax rate to 10 percent or 15 percent from 35 percent on any gifts above $13,000 a year. This would allow parents to pass along more money to their kids and grandkids while they are still alive, increasing federal tax collections in the next few years by billions of dollars, says the Journal.
Source: "The Walking Death Tax," Wall Street Journal, December 6, 2010.
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