- 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

Getting out of debt

Everyone hates debt. Get out of it.

View Course »

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

TurboTax Articles

Tax Exemptions and Deductions for Families

Families can often save more on their taxes than a single person. We'll help you understand who you can claim as a dependent, and which family-related deductions and exemptions will give you the greatest tax benefit.

Buying Your First Home

Buying your first home is a huge step, but tax deductions available to you as a homeowner can reduce your tax bill.

5 Hidden Ways to Boost Your Tax Refund

Most of us are looking for ways to pay no more than we owe in taxes, or even boost our tax refunds. Here are five strategies that go beyond the obvious with tried-and-true ways to reduce your tax liability.

What Is a 1099-G Tax Form?

The most common use of the 1099-G is to report unemployment compensation as well as any state or local income tax refunds you received that year.

Can I Claim Medical Expenses on My Taxes?

Medical expenses can take a bite out of your budget, especially if you have unforeseen emergencies that are not fully covered by your insurance. The Internal Revenue Service allows taxpayers some relief, making some of these expenses partly tax-deductible. To take advantage of this tax deduction, you need to know what counts as a medical expense and how to claim the deduction.

Add a Comment

*0 / 3000 Character Maximum