Obama Plans to Keep Estate Tax

[EconomicLiberal]

Source: Wall Street Journal

President-elect Barack Obama and congressional leaders plan to move soon to block the estate tax from disappearing in 2010, suggesting the levy might outlive the "Death Tax Repeal" movement that has tried mightily to kill it.

The Democratic stance on the estate tax contrasts with Mr. Obama's reluctance to press forward with his campaign pledge to raise income-tax rates on top earners, which he worries could have an adverse economic impact during a recession.

But Democrats are determined to act quickly to prevent the estate tax's scheduled repeal. Elimination of the levy on big inheritances was approved by Congress under President George W. Bush in 2001, with rollbacks phased in slowly and its full elimination slated to take effect next year.

The Senate Finance Committee will move within weeks on legislation to reverse that law, and Mr. Obama is expected to detail his estate-tax preservation proposal in his budget next month, congressional tax writers said.

Under the Obama plan detailed during the campaign, the estate tax would be locked in permanently at the rate and exemption levels that took effect this year. That would exempt estates of $3.5 million -- $7 million for couples -- from any taxation. The value of estates above that would be taxed at 45%. If the tax were returned to Clinton-era levels, it would exclude $1 million from taxation with the rest taxed at 55%.

In making their case for the restoration, Democrats contend that such a large additional tax break for the rich shouldn't go into force halfway through Mr. Obama's proposed economic-recovery package. They argue that the deficit is already in record territory, while their plan wouldn't have any impact on the economy since it would merely keep the estate-tax rate at its current level. Mr. Obama and his party also say that the affluent already have benefited handsomely from the Bush tax cuts.

Read more: http://online.wsj.com/article/SB123172020818472279.html

[WCGreen]

1. Good.

[Fridays Child]

2. Second that.

[John Q. Citizen]

3. Good.

[Fearless]

4. Excellent!

[bluesmail]

5. A good move. n/t

[Still Sensible]

6. I like Obama's idea as described

[PSPS]

7. Why only partially restore it?

I can understand the exemption, but why only 45% on the amount over the exemption?

There is a cabal of about 18 families that are bankrolling the whole "death tax" canard because, of course, they stand to benefit the most with their many billions of dollars.

The country was doing its best when the top estate tax was 78%

[ProgressiveProfessor]

8. The rich already beat inheritance taxes everyday, just like income taxes.

A friend and accounting prof gave me some great stories. Take it off shore and every estate is under the limit and no one makes any money.

[dreamnightwind]

14. Offshoring!

I agree, the money moved offshore that isn't subject to US estate taxes (or even US income taxes when it's first made) is where the real reform needs to be made.

The number of corporations "based" in the Cayman Islands is staggering. Robbery.

[ProgressiveProfessor]

20. There are some rules addressing US citizens exporting their wealth and becoming

expat or even changing nationalities as I understand it. However, if it is done under the radar or as sales to dummy companies, it can not be effectively traced, taxed, or punished.

[WriteDown]

22. I need to talk to your friend, seriously. nt.

[ProgressiveProfessor]

30. His comment is that any good high end accountant should be able to help you, avoid the "seminars"

He is just one of the other profs...it was lunch time conversation about how so many do not understand the ins and outs of the tax code.

His andothers main point is that in many cases, with the best of intentions the US Tax Code has been used for social engineering purposes, often noble in intent. However, the law makers who write the laws do not spend the time nor have the resources to evaluate all possible outcomes. Those that do find the myriad of holes in the complex tax code and then use it to their best advantage. Its quite a conundrum. The law makers then play whack-a-mole on the holes they created and the tax code becomes more complicated. *sigh*

There are several courses of action, the most obvious is a very simple progressive tax code. Not the Steve Forbes FairTax crap, but something similarly simple. Of course it will never happen since every sacred cow deduction would go. There would be international repercussions as well.

Its one of the key issues I hope and pray Obama fixes, but I believe it will elude him. Tax reform and tax fairness on at national and state level is key to rebuilding the economy after the wreckage we have now.

[marshall]

27. Agreed--why do you think Caroline Kennedy was so reluctant to release any financial figures?

The rich will continue to find ways to get richer.

[ProgressiveProfessor]

31. I don't have a problem with that if all of us do with her

Rich and poor are relative terms. Poverty is an absolute. Its not horrible that there are wealthy among us, but the number of people in poverty is a crime. There is enough food being produced so that no one on this planet has to go hungry, yet there are people starving to death. I am more concerned in the short term that we provide basics for all than destroying the super rich. In the interim, lets get a simple, rational, functional tax structure.

[sutz12]

9. They should raise it...

Economic dynasties are as bad as any other.

[Cronopio]

10. Yes! Sounds like he's going to follow through with a progressive tax regime. nt

[ProgressiveProfessor]

32. I am more worried about income taxes, which need a serious rethink

so complex that Congress can't figure where to patch next. It needs a major restructure to something much simpler, more progressive, and easier to enforce.

[Lasher]

11. Under Obama's plan only 0.3% of all estates would be subject to this tax.

The WSJ correctly says fewer than 2% would be taxed, but it is far fewer.

http://www.cbpp.org/5-31-06tax.htm

Congressional Republicans will ultimately go along with locking in this year's exemption level of $3.5M/$7M, but will try to get the tax rate lowered to 15% to appease their ultra-rich benefactors. Any compromise to lower the rate below this year's 45% would be a shameful capitulation by Democrats.

[machI]

12. The Estate Tax ought to be 98% above $3.5 million

It just burns me up that a few people are born with silver spoons in their mouths. The start out ahead of the average citizen, and usually stay ahead through minimal effort of their own.

Left to their own devices, the rich will enslave the poor. This is a clear case where the Government should level the playing field for all citizens of this country.

[bulloney]

13. Without an inheritance tax, you eventually have a feudalistic society of haves and have-nots.

You have a society in which a handful of families control virtually all of the wealth.

It would be one thing if these people lobbying for the tax's repeal earned their wealth, but I'd bet their wealth was directly or indirectly from inheriting the wealth that their parents or grandparents accumulated. They're just riding the gravy train thinking that's how all society lives. For those who don't, it's their own fault.

[Orrex]

15. Hey--that was going to be MY post!

:mad:

You're right, across the board.

[duhneece]

28. Exactly

They owe 98% of their 'wealth' to the sacrifices made by generations before them to provide the stable infrastructure to accumulate such wealth-infrastructure that includes roads, utilities, public education, the entire legal justice system, water and safe-food and drugs regulations, etc.

[Orrex]

16. Allowing the wealthy to keep their unearned billions is essential to our system of meritocracy

I'm sure I heard that on the radio somewhere.

[groundloop]

17. What's funny

is that the repugs I know who go on and on about how horrible the estate tax is will never come close to it affecting them. They're obviously getting their "facts" from that talk radio idiot.

[jpak]

18. Freepers will not like this!!!!111

:rofl:

[comtec]

19. Yeah, THAT'LL happen- they're gonna win the lottery or something

omfg freepers are fucking idiots!

you're completely right however.
they fight tooth and NAIL and never realize what BS the "death": tax is.

it will N E V E R affect them... E V E R!!!

and if it does, they should be so lucky!

[WriteDown]

21. This sucks!!!!!!!!!!!!

Although, now that my family home on Long Island has dropped significantly, this may not hit me. I've spent quite a bit on lawyers trying to avoid this, but maybe the fates will help me out. If I was hit by the tax, there was no way I could keep the house.

[Alhena]

24. If you aren't satisfied with $3.5 million tax free, too bad

[WriteDown]

26. 3.5 million isn't too bad....

1.5 million may have been a problem. I honestly think that any inheritance should just be taxed at the income tax rate. It would be like a 1099 on your taxes.

[GodlessBiker]

23. Good move.

[kdpeters]

25. Paul Krugman called it the Throw Mamma from the Train Act of 2001

Jan 1, 2010: Estate tax is fully repealed.
Jan 1, 2011: Bush tax cuts, including Estate Tax, revert back to pre 2001 levels.

Christmas 2010: George HW and Barbara Bush tragically killed in a small plane crash.

Edited to add link to Krugman's column from May 29, 2001: http://www.pkarchive.org/column/53001.html">Bad Heir Day

[tom_paine]

29. That's a hopeful economic move, if true.

n/t