June 22, 2006
House Ways and Means Chairman Bill Thomas, the chief House tax writer, has proposed a compromise bill on the death tax that could be voted on as early as today but is hardly an improvement over current law. His proposal would link the top death tax rate to twice the tax rate on capital gains, says the Wall Street Journal.
The problem is that after 2010 the capital gains tax is scheduled to rise to 20 percent from its current 15 percent. This would mean an estate tax rate of 40 percent, barely better than today's rate. And it gets worse, says the Journal:
- To accommodate the Joint Committee on Taxation's revenue estimates, Thomas would eliminate the repeal now scheduled for 2010 and keep in place the high estate tax rates until then.
- The Thomas bill also repeals the federal tax credit for filers who pay state death taxes, so people living and dying in states with high death taxes could see their estate tax liabilities rise to more than under current law.
All of which has those who have labored the hardest for estate tax repeal scratching their heads, says the Journal. They understand that some compromise might be worthwhile, especially because a new Congress next year might not have as much repeal support. But any deal ought to be at least a big improvement on current law and promise substantial relief for the non-rich who pay the bulk of this tax, says the Journal.
On both moral and economic grounds, the proper rate of tax at death should be zero because most of this money has already been taxed once, twice, and sometimes even three times, says the Journal.
Source: Editorial, "Doubting Thomas," Wall Street Journal, June 22, 2006.
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