- 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.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

TurboTax Articles

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, Me Worry? Last Minute Taxes

According to the Internal Revenue Service, 20-25% of all Americans wait until the last two weeks before the deadline to prepare their tax returns. At that late date, there are only two things you can do: File your taxes pronto, or request a tax extension.

Can't File by the Deadline? Top 3 Reasons to File a Tax Extension

The Internal Revenue Service allows taxpayers to file for a 6-month extension if they need more time to prepare their tax return. You can obtain a tax extension for any reason; the IRS grants them automatically as long as you complete the proper form on time. Check your state tax laws; some states accept IRS extensions while others require you to file a separate state extension form.

Add a Comment

*0 / 3000 Character Maximum