Estate tax plan would benefit wealthy even more (WP)

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http://www.washingtonpost.com/wp-dyn/content/article/2010/12/10/AR2010121006931.html

Estate tax plan would benefit wealthy even more
By Zachary A. Goldfarb

One part of the tax deal between President Obama and congressional Republicans stands out because it would make the tax code even more generous to the wealthy than it was during the Bush era: the estate tax.

The focus of the debate between Obama and Republicans in recent weeks centered on whether to extend the Bush income tax cuts for the wealthy in addition to the middle class. Republicans won not only on that measure, but also on a proposal to reduce taxes on estates. Under the proposal, individuals would be able to pass on $5 million in assets tax-free to their heirs. Above that, estates would be taxed at a top rate of 35 percent. The tax would affect the estates of people who die in 2011 and 2012 and a small portion of those who die or have died this year. The measure expires at the end of 2012.

Democrats favor a less generous approach. They want to resurrect the 2009 estate tax, which carried a $3.5 million exemption and a top rate of 45 percent. Senate Democrats are now reluctantly supportive of Obama's proposal. But House Democrats are mulling an effort to scale it down, congressional aides say. There is no estate tax on the books for this year. The Bush administration began phasing out the tax in 2001 - a step long favored by Republicans, who called it a "death tax." This year, it finally disappeared. The nonprofit Tax Policy Center estimates that the tax generated $14 billion in revenue in 2009.

The lack of an estate tax this year has already benefited the heirs of at least two billionaires, including oil tycoon Dan L. Duncan, whose estimated net worth was $9 billion, and Yankees owner George Steinbrenner, whose estimated worth was $1.15 billion... Leonard E. Burman, a tax policy expert at Syracuse University, argues that expanding the estate tax to benefit the wealthy even more is fundamentally unfair given the fact that lower- and middle-class Americans have seen their wages stagnate for decades. "The people at the very, very top have made enormous gains," he said. "Now we're saying, you've ridden this huge wave of economic inequality and now we're going to let you pass even more of your wealth to your heirs without paying any taxes." ...