Friday, June 23, 2006

Last Chance at Estate Tax Modification in 2006?

Amidst criticism from many Democrats regarding fiscal responsibility and revenue losses, the House passed 269-156 (about 5:3) legislation which would significantly reduce the number of estates which would be subject to estate taxes. Ways and Means Chairman William Thomas (R-CA) said that the bill would be the House's only attempt to revamp the estate tax during this session. Important facets of the bill include: making the changes permanent (no sunset after 2010); an increase in the exemption equivalent to $5 million (to be indexed in future years) and use of a two-tier rate ($5-25 million net of inflation adjustment to be taxed at capital gain rate (presently 15%); amounts in excess of $25 million to be taxed at double the capital gains rate). Estimated revenue losses from the bill were estimated at $283 billion over the next 10 years by the Joint Committee on Taxation.

This seems to me to be a good compromise between estate tax repeal and the present estate tax scenario which hits somewhat well-off people (including long-time family farmers). Certainly to goodness, Congress can find $28 billion in annual pork to eliminate to cover the cost of this adjustment.

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