Posted on 06/22/2006 2:59:25 PM PDT by NormsRevenge
WASHINGTON - The House voted Thursday to cut taxes on inherited estates and relieve thousands of heirs from paying tax collectors beginning next decade.
The 269-156 vote, just a few months before an election with control of Congress at stake, saw majority Republicans temporarily setting aside their ambition to abolish the tax.
Instead, they voted to exempt from taxation individual estates up to $5 million and couple's estates up to $10 million, while also blunting the impact on even richer families. The compromise measure now goes to the Senate.
The White House called the bill "a step in the right direction."
Congressional tax experts estimated that if the changes become law, only 5,100 estates would face taxation when the changes are fully in effect in the fiscal year beginning Oct. 1, 2011. The Internal Revenue Service levied taxes on more than 30,000 estates in 2004, the most recent figure available.
However, the bill also restores estate taxes in 2010, deleting what had been a one-year reprieve from them entirely under an earlier law.
President Bush and Republicans in Congress have long pressed to abolish the estate tax, contending it is unfair to tax businesses and farms left to the next generation.
"Americans are being taxed almost every moment of their lives. My goodness, when they are dead, do we have to tax them again?" said House Majority Leader John Boehner, R-Ohio.
Democrats argued that it is more unfair to give millionaires a tax cut while denying thousands of poor workers a higher minimum wage.
"This is the ultimate values debate," said House Minority Leader Nancy Pelosi, D-Calif. "It is morally wrong to do this, especially when we are turning down, rejecting, an increase in the minimum wage."
Bush and Republicans in 2001 had succeeded in killing the estate tax for one year, 2010. But the tax would have reappeared in 2011 at a rate of 55 percent under Bush's initial tax cut package.
The House bill would replace that temporary law by reducing, but not eliminating, the estate tax. It responds to a plea for help from Senate GOP leaders, who discovered earlier this month they did not have enough votes to abolish the tax.
That forced lawmakers to talk compromise, but GOP tax writers, under pressure from the House's most conservative Republicans, said they wouldn't negotiate further than the offer made in the bill.
"This is not a first offer. It is the only offer," said House Ways and Means Committee Chairman Bill Thomas, R-Calif.
The exemptions, $5 million for an individual and $10 million for a couple, would increase automatically each year to keep pace with inflation.
After the exemptions, estates worth up to $25 million would be taxed at rates equal to those on capital gains, currently 15 percent but scheduled to rise to 20 percent in 2011.
The remainder of any larger estates would be taxed at rates twice that of capital gains, or 30 percent at first and 40 percent when the scheduled capital gains tax increase takes effect.
The bill would let a surviving spouse take any unused portion of a deceased spouse's exemption, but it also would eliminate the federal deduction for estate and inheritance taxes levied by states.
The Joint Committee on Taxation estimated the tax reductions amount to roughly $283 billion from 2006 to 2016.
Additional analysis, obtained by The Associated Press, shows the future cost in lost revenue to the government would increase to more than $300 billion if lawmakers keep the 15 percent capital gains rate in place in future years, instead of letting it increase to 20 percent in 2011.
Some business and farm groups favoring repeal of the tax said they could accept the compromise, but only as an interim step on the way to eliminating the tax.
The National Federation of Independent Business said it would do everything possible to see the bill enacted. "NFIB will continue to fight for full repeal of the death tax, but our members need guaranteed relief they can plan on right now," said executive vice president Dan Danner.
The House bill also contains a reduction in timber taxes, part of a strategy to pass the bill in the Senate by luring support from key Democrats.
Jim Manley, spokesman for Senate Minority Leader Harry Reid of Nevada, said the compromise doesn't go far enough for Democrats. "I'm hopeful that we have the votes necessary to stop this multibillion-dollar tax break for some of the wealthiest individuals in this country," he said.
Without the legislation, the first $1 million of an individual's estate and $2 million of a couple's would be exempt from estate taxes beginning in 2011. Additional amounts would be taxed at rates up to 55 percent.
Thanks.
It needs to be totally abolished, but almost anything would be better than the ridiculous existing law where it goes to 0 in 2010 and jumps back to 55% in 2011. How can anyone do estate planning with a law like that in place?
"How can anyone do estate planning with a law like that in place?"
Gonna have to finagle a few dates, if pop keels over on the wrong date.
"He's not dead. He's just sleeping"
I don't think the estate tax should be abolished completely. If nothing else, the transfer of an estate to one's heirs should be considered a taxable event as if all of the assets in question were sold -- and taxes paid on the proceeds at the appropriate capital gains tax rates. Admittedly, this could be an enormous burden for very large estates -- so maybe the tax liability could be spread out over multiple years.
Seriously -- I predicted that if no changes were made in this law we would see a lot of frail elderly rich people getting euthanized (voluntarily or not) in December of 2010.
There will be a lot of plugs being pulled on 12/31/10.
It needs to be totally abolished. The earnings have already been taxed or will be taxed by capital gains.
Fixed the typo.
This is the key to the whole issue - NOT the gain or loss of government revenue. It's about COMMUNISTS levelling the playing field on their terms. It's not about revenue and not about right and wrong.
Heh. I was thinking of the dead parrot sketch myself.
Why HAVE ESTATE, GIFT, or INCOME taxes at all? Why tax businesses (who then just pass it on to us). Why not have the FairTax???
It's like this man said:
"I don't like the income tax. Every time we talk about these taxes we get around to the idea of 'from each according to his capacity and to each according to his needs'. That's socialism. It's written into the Communist Manifesto. Maybe we ought to see that every person who gets a tax return receives a copy of the Communist Manifesto with it so he can see what's happening to him".
-- Former IRS Commissioner T. Coleman Andrews, May 25, 1956 in US. News & World Report
yeah, i thought of that one too.
whatever the situation, there's always a Monty Python reference in there somewhere...
Doubtful you would think that if it was YOUR business that your children would have to sell to pay the taxes. It's only the EVIL RICH.
The death tax is just rampant class envy codified into law.
rational = rationale
"This is the ultimate values debate," said House Minority Leader Nancy Pelosi, D-Calif. "It is morally wrong to do this, especially when we are turning down, rejecting, an increase in the minimum wage"
What about the women and children?
Eliminate the death tax and you eliminate the rational for the gift tax - which affects EVERONE, not just the rich.
Translation: "It is morally wrong not to steal already-taxed money from people who can easily afford to have it stolen, especially when we are turning down, rejecting, an increase in the mandatory payment of extra free money to people whose skills don't merit it."
Nancy's definition of morality is quite a bit different from the one I learned in Sunday School. ;)
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