- Days left

Death tax repeal gets new life

death tax - the Grim ReaperWhen the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA 2001) was signed into law by President Bush, many expected that years of fighting over a permanent repeal of the federal estate tax would finally be over. Under EGTRRA 2001, the personal exemption available under the estate tax increased to $3.5 million in 2009 with a temporary repeal for 2010. The expectation was that some form of compromise bill would take effect, boosting the personal exemption to between $3.5 million and $5 million. That didn't happen.

Just four years after EGTRRA 2001 passed, the idea of complete repeal was back in the news. Majority Leader Sen. Bill Frist (R-Tenn.) was at the forefront of the movement, arguing that the federal estate tax destroyed small businesses. In a dramatic speech on the Senate floor, he argued:
If you are an enterprising entrepreneur who has worked hard to grow a family business or to keep and maintain that family farm, your spouse and children can expect to hear the knock of the tax man right after the Grim Reaper.


Despite Senator Frist's passionate plea for reform, nothing happened. And by nothing, I mean that there was not only no movement on federal estate tax repeal, there was no change to the existing law. Same exemption amount, same repeal for 2010, same sunset for 2011. That means unless Congress passes a law before the end of the year, the exemption amount will drop to $1 million. Some in Congress think that's too much; others believe it's too little. And yet, for nearly a decade, nothing has changed.

This July, it appeared there might be some progress on solving the federal estate tax problem. Sen. Jon Kyl (R-Ariz.), a longtime opponent of the federal estate tax, and Sen. Blanche Lincoln (D-Ark.) joined in a bipartisan effort to increase the estate tax exemption to $5 million. The measure gained some initial support but, with an election looming, eventually lost steam. Congress seemed content to take a "wait and see" approach.

However, in the last few weeks, that has changed. GOP candidates, eager to distinguish themselves from their Democratic counterparts, have increasingly shown support for a complete repeal. More than half of the Republicans running for House and Senate have now signed a pledge crafted by the American Family Business Institute to eliminate the federal estate tax. You can check to see where your candidate stands on its website.

Those in favor of a federal estate tax repeal believe that momentum is now on their side. A recent poll by the nonprofit Tax Foundation indicated that a majority of taxpayers believe the federal estate tax is the most unfair federal tax, despite the fact that, statistically, if affects the least taxpayers.

Opponents note, however, that the loss in revenue is significant especially in a down economy. The IRS hasn't yet calculated the total figures lost in 2010 due to the one time repeal. However, at least four billionaires have escaped the clutches of the federal estate tax this year, including New York's George Steinbrenner and Texas' Tim Duncan, with estimates of lost revenue for the year totaling into the billions.

It has been suggested by the Center on Budget and Policy Priorities that making permanent the repeal of the estate tax after 2010 would add almost $1.3 trillion to the deficit between fiscal years 2012 and 2021. To put that into perspective, the entire discretionary spending budget for 2010 was $1.368 trillion -- that includes the budgets for all departments including Defense, Education and Labor.

Despite the huge hit to the Treasury, backers of a complete repeal are betting that the perception of the tax as unfair will lead to taxpayer votes next week. The bigger question is whether that will translate into Congressional support before 2011.

Increase your money and finance knowledge from home

What is Inflation?

Why do prices go up?

View Course »

Intro to different retirement accounts

What does it mean to have a 401(k)? IRA?

View Course »

TurboTax Articles

5 Tax Tips for Single Moms

If you're a single mom filing your taxes, make use of tax credits and deductions that can help reduce your taxable income and reduce the amount of tax you pay. A number of strategies, credits and deductions can be used to reduce taxable income, and in some cases, allow tax refunds even if you didn't pay in any taxes. When you use TurboTax, we'll ask simple questions and handle these calculations for you.

Essential Tax Forms for the Affordable Care Act

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

What is Form 1095-A: Health Insurance Marketplace Statement

If you bought health insurance through one of the Health Care Exchanges, also known as Marketplaces, you will receive a Form 1095-A which provides information about your insurance policy, your premiums (the cost you pay for insurance) and the people in your household covered by the policy.

Keeping Yourself Safe From Tax Scams Today

During tax time, there are numerous types of tax scams. These illegal schemes can result in the taxpayer being responsible for extra interest, penalties and possible criminal prosecution. Tax schemes and scams attempt to gain access to your financial information by email, telephone, fax or mail. They also may attempt to falsely collect tax you owe to the Internal Revenue Service. Using TurboTax ensures your financial information remains safe.

Health Care and Your Taxes: What's the Connection?

Your cost for Marketplace health insurance is based on the income you file on your tax return. Your reported income also determines your eligibility for the tax credits and penalties associated with Marketplace health coverage. Everyone has to have health insurance and by filing your taxes, you let the government know if you carry health insurance. The tax system acts as a way for the government to levy a penalty on those who don?t have it and to provide assistance, by means of a tax credit, to those who do.

Add a Comment

*0 / 3000 Character Maximum