Posted on 10/24/2008 1:48:21 PM PDT by longtermmemmory
Estate Tax Takes Shape In Campaign Talk
By ARDEN DALE A DOW JONES NEWSWIRES COLUMN
NEW YORK -- Estate-tax talk on the campaign trail is helping resolve a very thorny tax problem for the rich.
Making a plan to shield an estate from the federal death tax has been tricky for financial planners since the Economic Growth and Tax Relief Reconciliation Act of 2001 phased in a series of changes over the past few years.
The future seems clearer now, though, as Senators Barack Obama and John McCain outline their plans for the tax. A new study by the Tax Policy Center that analyzes their positions concludes Congress is likely to reform the estate tax to target the very largest estates.
And, many tax planners now think estate-tax legislation is likely by the middle of next year, according to Michael Martin, a tax advisor in Independence, Mo., who is founder and president of Mike Martin & Associates.
This year, estates over $2 million can be taxed as much as 45%. In 2009, the threshold will rise to $3.5 million. In 2010, the tax will be repealed for a year, but reinstated in 2011 at up to 55% on estates over $1 million.
The looming one-year tax holiday in 2010 has spurred gallows humor about keeping dying relatives on life-support until then. All joking aside, however, many planners have been flummoxed about a strategy for their wealthy clients.
"Quite frankly, they're all tearing their hair out," said Thomas Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants. "You like to have an estate plan and have clients sign it."
In this case, Ochsenschlager said, "it looks like they're going to have to pull these out of the files after the election, and wait for Congress to pass the statutes."
The Tax Policy Center study concludes that "it seems clear Congress will neither allow the estate tax to expire in 2010 nor return to is pre-EGTRRA form in 2011.
Len Burman, a senior fellow at the Urban Institute and co-author of the study, said he thinks it most likely that Congress will make the 2009 exemption and rate permanent.
Both presidential candidates would scale back -- but not eliminate -- the estate tax. McCain wants to apply the 15% long-term capital gains rate to estates worth more than $5 million starting in 2010, according to the study. Obama proposes a 45% tax on estates worth more than $3.5 million, the parameters currently scheduled to apply in 2009.
Obama's plan would cut down the number of estate tax filers dramatically, according to the study. In 2011, 17,400 estates would be taxed under his proposal, roughly 15% of the 125,000 under current law. The 7,200 taxable returns would pay about $21 billion in estate tax, a little over half of that under current law.
Under McCain's plan, only 3,600 estates would pay the tax in 2011. The high exemption and low rate would reduce estate-tax liability almost 90% to $4.9 billion, according to the study.
The study estimates that, in 2008, just 15,500 estates will owe the tax, representing 0.6% of all people who die. In 2009, when the exemption rises to $3.5 million, the number of taxable estates will fall to 6,200. More than four-fifths of the estate tax is paid by the top 1%, and close to half is paid by the richest 1 in 1,000 individuals.
However that said, this is an exemplar of the positions on success of Obama and McCain.
Obama doing more spreading around.
This also explains why people are converting their positions into easily moved cash til after the election.
This market and recession is the Obama recession.
Pro death, pro death tax. Go figure.
notice that while the author says only 1 in 1000 actually pay that tax, it is only a matter of time before the democrats want to “spread around” the duty to pay more taxes.
net result, people move assets outside the USA.
1 in a thousand is BS.
That would mean only 300,000 people have an estate over $1 million - smell check fail - bigtime.
Nice!
Death, taxes, taxes after death!
Thank God we have government to make sure we spread our wealth responsibly!
ruefully
In one of his books, Obummer learns that his grandmother is a “typical white person” because she was uncomfortable when a black man tried to shake her down for money at the bus stop. It seems Obummer’s take away from that story was that he and others who are darkly pigmented are entitled to shake down those who work for a living.
Correct! Look at what happened with the Alternative Minimum Tax. Now affecting 10s of millions of Americans.
Re-read the figures 1 in 1000 pay 50% of the tax. Thus of the 15,500 who have estates large enough to pay the tax, 15 pay half of the taxes.
If you believe even for a second that everything you ever worked for, and paid taxes on, needs to be taxed again....
Marriage will soon no longer be defined as between one man and one woman.
Marry your kids so they don’t pay taxes on inheritance.
Since the death of my great grandfather, our family's upper middle class farm had to sell land, bonds, and equipment to support Uncle Sam's greed. Money that should have been reinvested in better equipment and land instead went to paying the “death tax” three times since the 1950's. The fourth will be the last and another family farm will be sold off to developers.
Hope ya’ll can learn how to eat asphalt, folks.
Those who take up a career in government seem instantly to develop a lust for other people’s possessions which is on a truly cosmic scale. It’s so far beyond belief that it beggars the human imagination as well as the human bank account.
Death taxes are double / triple PLUS taxation....and immoral, IMO.
The State did nothing for that money...The Fed's did nothing for that money.
The same with SSI money.....my pop collected ZERO money. Because he passed away at the age of 64....
He paid in DOUBLE...because he was mainly self-employed. I dunno the amt. he paid in....but it was alot.
Just wait till the feds do this new and improved " you will do this or else" 401k program.....You die, you won't get it. And neither will your family. The STATE will get it!!
RANT OFF!!!!
bump for later
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.