Monday, June 28, 2010

A Responsible Estate Tax

In the face of record-breaking deficits, lawmakers are looking for ways to increase tax collections. And the estate tax is ripe for changes. Since January 1, 2010 the United States has been estate tax free, which means our government has already missed out on some big dollars when Texas billionaire Dan L. Duncan passed away this March. Not anxious to miss out on more money, Don’t Mess with Taxes writer, Kay Bell reports that two new estate tax bills are in play.

One bill, written by five senators, proposes a progressive estate tax structure. According to Senator Bernie Sanders, the bill’s sponsor, “99.7% of Americans would not pay any estate tax whatsoever.” The bill states:
  • The first $3.5 million ($7 million for married couples) of an estate is exempt from federal taxation.
  • Estates valued over $3.5 million and under $10 million would be taxed at 45%
  • Estates valued over $10 million, but under $50 million would be taxed at 50%
  • Estates valued over $50 million would be taxed at 55%
  • Estates valued over $1 billion would have an additional 10% surtax
A popular argument holds that family farms are hurt by estate taxes, so this bill allows farmers to lower the value of their farmland by up to $3 million for estate tax purposes.

The second bill being discussed is a bi-partisan effort from two members of the Senate Finance Committee. While the bill has not been proposed yet, it reportedly includes a 35% top rate, and excludes any estate under $5 million ($10 million for couples). The bill may also include an incentivized pre-payment concept, wherein a person could pay a lower estate tax if they pay up before they pass on.

Read the full article here:

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