WASHINGTON (Dow Jones) — House Democrats plan to introduce a bill Thursday to extend and overhaul the estate tax beyond 2012 in the opening salvo of what is likely to be a long and politically-charged debate next year.
A favored target of Republicans, the tax on inherited wealth already promises to be one of the most controversial elements of the tax code up for renewal at the end of next year. Six Republican presidential candidates, including all of the front-runners, have said they would repeal the tax.
But the legislation by Rep. Jim McDermott (D., Wash.), a veteran member of the House Ways and Means Committee, proposes to extend the current reach of the estate tax by reducing the amount of the estate exempted from the tax to $1 million from $5 million and raising the tax rate to 55{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e} from 35{fe867fa2be02a5a45e8bbb747b653fe2e9d0331fd056b85cd0c1a3542435a96e}, bringing it back to pre-Bush era levels.
“I’m not against people making money in this country, but I do think they have a responsibility to give some of it back,” especially at a time of a deep federal budget deficit, McDermott said in an interview this week.
While Democrats acknowledge they will face stiff resistance from Republicans, McDermott said taxpayers need to know Congress is not ignoring the issue until the last minute. In a deal reached with President Barack Obama last December, Congress reinstated the estate tax for this year and next, after letting it lapse for one year in 2010. While the estate tax is slated to revert back to 2001 levels after next year, Republicans in Congress have already introduced legislation to repeal it again.
“It really is a question of clarity,” for both families and planners, McDermott said. “The question is how to bring fairness into it.”
Under McDermott’s proposal, co-sponsored by Rep. Charles Rangel (D., N.Y.), the exemption for married couples would drop to $2 million from $10 million. Spouses could still claim the remainder of their partner’s exemption if some remains unused after death, as they can now. The rate and $1 million exemption would be adjusted for inflation, beginning at the 2000 level.
The bill, slated to be introduced Thursday, would also unify estate and gift taxes. That means a taxpayer would only have a single exemption of $1 million for their estate and most gifts. The legislation also includes several provisions from Obama’s last budget proposal to end targeted estate tax breaks.
Republicans, often led by Sen. Jon Kyl (R., Ariz.) have pushed hard in previous years to repeal the tax, whose rates and exemption levels have varied wildly over the last decade.
Complicating the issue is the congressional deficit-reduction panel, which could include tax code changes in a final deal or instruct tax-writing committees to overhaul the tax code by a certain date. On Thursday a coalition of 29 groups, including the conservative anti-tax advocacy organization, Americans for Tax Reform, sent the supercommittee a letter pressing it not to raise the estate or gift taxes as they try to find an agreement before next week on how to curb the federal budget deficit.
“We urge you to seek ways to reduce or eliminate estate and gift taxes, and to reject measures that will further burden family businesses and farms, when considering how to reduce the nation’s deficit,” the coalition wrote.
Meanwhile, Bill Gates, Sr., the father of Microsoft Corp. founder Bill Gates, Jr., lent his support to extending the estate tax, in a statement Thursday.
“I have long believed that individual wealth is only possible through the significant investment America makes in the lives of its citizens,” Gates said. “An estate tax ensures that those who have benefited the most from this great country reinvest in the very promise of wealth and opportunity American provided them.”
Source: Dow Jones
Posted by Haylie Shipp
