Skip to comments.A Tale of Two Taxes
Posted on 03/26/2009 8:33:25 PM PDT by Scanian
For Washington's tax writers, it is the best of times and the worst of times. On one hand, the alternative minimum tax, which has created political angst for years running, has already been "patched" for another year. On the other, a looming debate over the estate tax could be even more politically charged. Examining these two taxes -- with important similarities but a fundamental difference -- yields great insight into the dynamics of U.S. tax policy.
Perennially "patched" to negate its unintended ensnaring of middle-income earners, the AMT has become the tax world's Sisyphean task. Its sizable cost -- and whether it should be offset -- make it the stone Congress laboriously rolls up the Hill each year only to see it roll down the next. This has made it a "lights out" legislative issue -- done at year's end with other tax items attached. Until this year. The economic stimulus' size and urgency allowed the AMT to pass rapidly and unoffset through Congress.
But those thinking Washington will be spared a tax fight, can think again. Looking deeper into the tax code, one finds an even more politically explosive tax provision lurks.
Labeled the "death tax" by foes, the estate tax has more facets than the Hope diamond. Reduced in the 2001 tax cuts, it goes on a whip-sawing roller coaster ride over the next three years. In 2009, it assesses a 45% rate on estates over $3.5 million, disappears completely in 2010, and then reverts to its pre-2001 level of 55% for estates over $1 million in 2011.
(Excerpt) Read more at spectator.org ...