They Are Talking About the Estate Tax – Finally

Some Greek news service of all places has a Dow Jones report from the press conference after the meeting of the President and Congressional leaders.  Senator Kyl, who will represent the Senate Republicans in the talks with Democratic congressional leaders and the Treasury and Budget Secretaries, is quoted as stating the following:

Kyl said there was a range of issues that have to be addressed including a renewal of the estate tax, a longer-term fix for the Alternative Minimum Tax and payments to ensure that doctors who treat Medicare patients don’t see steep cuts in compensation.

ABC News reports Senator Kyl actually brought up the estate tax issue in the meeting.  However, the report did not say if anyone else in the room had any reaction, good or bad.

Hence, all of a sudden we have a shift in the odds.  This development certainly increases the odds they will address the estate tax as part of a settlement.  I have not had time to really think it through and so am not prepared to give my opinion on the odds now.

However, I can say one thing:  I have learned from years of negotiating for clients that if my client has determined they want to settle and not fight, they will fare very badly in the negotiations.  When it comes down to conceding on an issue or walking away and going to court to fight, they will concede.  It presently appears from what I can glean from the news reports the President has said they will negotiate to reach a settlement.  The Republicans would apparently actually prefer to not solve anything until the new Congress arrives, next year.  Therefore, I conclude the President and the Democrats will fare very badly and the Republicans will triumph by the time the dust settles.

By Kevin Staker

Little Talk of the Estate Tax

As this author writes this the President and the leaders of Congress are meeting.  They will certainly talk about taxes.  However, none of the players has mentioned the estate tax in their pre-meeting posturing.  Hence, I continue to believe we will have no estate tax fix before January 1st.  In fact, on the income tax the outlook is very uncertain.  I understand they are only meeting for an hour.  Hence, unlikely they will get anything really done.  Anyone who has negotiated something serious knows it takes hours and hours of discussions back and forth to resolve anything.  Therefore, I continue to believe they will persist in their muddling along, only to pass a two year extension of the tax cuts as they leave Washington for Christmas, and the estate tax will be lost in the shuffle.

Again, this is all so strange.  I believe if you held a straight up or down vote on a $3,500,000 exemption and a 45 percent estate tax, it would get over 60 votes in the Senate and would pass.   The Republicans are delusional if they think they can get a better deal from this President in the next Congress.

By Kevin Staker

Good Analysis from Bloomberg on Impact of Various Estate Tax Exemptions, Also Points Out How Estate Tax Not Being Discussed

Good analysis at Bloomberg.com on the status of the estate tax.  Speaks of how none of the alternatives currently has the 60 votes needed.  Hence, I believe confirms my opinion nothing will happen.  Hence, likely we will at least start 2011 with an estate tax with only a $1 million exemption.  A good quote:

The federal levy on estates is set to increase the most of all as tax cuts expire Jan. 1, jumping from zero to 55 percent for fortunes worth more than $1 million at death. President Barack Obama and Democrats in Congress barely mention it as they spar with Republicans over whether to keep income-tax reductions for top earners.

By Kevin Staker

Excellent Analysis of the Chaos in Congress at talkingmemopoints.com

There is an excellent analysis at chaos in Congress, most notably even among the Democrats themselves, on the tax issues.  It is at http://tpmdc.talkingpointsmemo.com/2010/11/dems-out-of-sync-on-tax-cut-strategy.php

The key points, I believe are:

The real battle will be to get 60 votes to overcome a filibuster in the Senate.

Along that line then, what, if anything, the House does will be irrelevant.

Amazing really that the Democrats cannot craft a compromise now to get the 60 votes, especially on at least the estate tax.

By Kevin Staker

Poll: 56 Percent of Americans Do Not Want Estate Tax to Increase “Significantly”

USA Today reports results from a poll the following regarding the estate tax:

•A 56% majority say it is “very important” to pass legislation that would keep the estate tax from increasing significantly next year. The tax, which expired this year, is scheduled to return in January to as high as 55% for estates valued at more than $1 million.

So what do the other 44 percent believe?  Would oppose, in other words, want a $1,000,000 exemption?  Do not care, however, may be the unfortunate answer.

By Kevin Staker

Favorite Quote: See Your Estate Lawyer Now–If You Are Rich Or Frying A Turkey

Janet Novack in a Forbes blog has my favorite title so far in an article regarding the estate tax chaos: See Your Estate Lawyer Now–If You Are Rich Or Frying A Turkey

Did you know that every Thanksgiving an average of something like eight  houses are burned down by folks trying to deep fry a turkey?  I guess sometimes the hot oil vapor ignites  and flames erupt.  Many times setting the home on fire.

80 Percent Probability of No Change to 2011 Estate Tax Law (In My Opinion)

It is appearing more and more likely that there will be no agreement on the Bush income tax cuts, and even more likely there will be no change to the estate tax law.  I now officially raise my prediction to an 80 percent probability the Democrats and the Republicans in Congress, especially in the Senate, will not agree to any change to the looming return of  the estate tax on January 1st of only a $1,000,000 exemption and a top 55 percent (actually 60 percent) rate.  The “game of chicken” appears likely to continue with what I believe will be the disaster of January 1 arriving with no tax act passed and signed by the President.  To continue the metaphor, neither side will swerve aside and they will collide.   The result will be the flaming car wreck of our returning to the pre-2001 law on both income and estate taxes.  Tragedy as it will be, here is what is appearing will be the scenario.

The Republicans remain intransigent on insisting on permanent tax cuts for all.  The President believes that would be wrong for the upper income earners.  The polls suggest a majority of the American people agree with him.  However, the Republicans appear emboldened by their election victory and are willing that January 1st arrive with no tax act passed.   There only goal appears to harm the President.  I believe they feel no agreement will harm the President more than them.  I guess they believe it shows his impotence now.   I also think they believe the President will then capitulate in early 2011 and give them the permanent tax cuts for all.

I am surprised to learn the Democrats do not have the votes in the existing Congress to pass a tax fix.  I would have thought they could cobble together 60 votes in the Senate to get something passed.  I would have thought there would have been a Republican Senator, such as  Voinovich or Snowe, that would do what is right (override a filibuster) pass some tax fix for the income and estate taxes before the disaster of January 1st.  I guess I am wrong.

The NY Times reports:

Yet Mr. Durbin, the party’s vote counter, said he was skeptical that anything of substance could get done in the lame-duck session given the need to overcome procedural hurdles.

“As the whip, it has been my sad duty to count to 60, and I have missed that number many times,” he said. “This is going to require bipartisan effort. Is it frustrating? Yes. But that’s the reality we have to deal with in the Congress.”

This is really looking like it will be a flaming car wreck.  Amazing they cannot agree on even the estate tax fix.

In conclusion, to put it another way:  I now give it only a 20 percent chance that Congress will increase the exemption above $1,000,000 and the rate to something less than 55 percent.  “What a world, what a world!”

By Kevin Staker

Report: Baucus to Include Estate Tax Fix in Trial Balloon Tax Bill; Meeting to Negotiate Tax Issues Postponed to Nov. 30

Vickie Needham at The Hill reports that Senate Finance Chair Baucus is preparing a tax bill to extend the Bush tax cuts for all for two years.  The report is that the bill would include addressing the estate tax with one would assume a $3.5 million exemption as the President supports.  This bill would then be the piece of legislation the two parties could negotiate over.

One other note:  the report states the President and the congressional leaders have postponed until Nov. 30th the meeting that was to occur this week to negotiate over these tax issues.  The stated reason is the Republicans’ “scheduling conflicts in organizing their caucuses”.  What in the heck does that mean?  The word from the Republicans is that the date was not set in stone.  I find it bizarre these folks are not getting started early in dealing with these important tax issues.  Amazing how dysfunctional it is back in Washington.

I fear that we may end up with no action on anything in 2010.  That is what happened at the end of last year regarding the estate tax.  The House passed a bill with a $3,5 million exemption for 2010 but the Senate waited so long it would have taken a unanimous vote to pass the House bill before the end of 2009.

I am afraid the same will happen this time.  They will not allow themselves enough time to work out a deal and all the details before the end of 2010.  For example, the Washington Post reports the Senate Democrats met today for two hours and never discussed the tax issue. The CNNPolitics blog reports:

But Democratic officials say they would have made the meeting despite the crowded schedule and they’re questioning the GOP commitment to working together. “They can spin it however they want,” said one Democratic official. “All I know is that a bipartisan group of the House and Senate leadership were invited to the White House. It doesn’t bode well for future cooperation.”

What is wrong with these people!  (Sorry from my digressing from a professional tone but this is getting pretty exasperating.)  I cannot imagine how organizing the Republicans’ internal structure in Congress could be more important than resolving these tax issues.  They talk about not wanting to harm small business.  Believe me this is now about to harm small business.  The uncertainty regarding taxes will now begin to have a true effect.  What morons! I believe the Republican leaders are doing this just to spite the President.

By Kevin Staker

Notice in Discussion of Compromise re Income Tax No Mention of the Estate Tax

Note in the news multiple signs of compromise between President and Congress re extending tax cuts for all for a year or two but no mention of the estate tax (for example see Wall Street Journal).  Again, I predict the estate tax will be lost in the shuffle.  If not discussing it now, will not be part of the compromise.  They will want to avoid too many moving parts.  (However, AMT fix will occur separately.)

By Kevin Staker

More Signs Estate Tax Will Not Be Addressed and We Will Have a $1 Million Exemption

The Hill has an article in which Alexander Bolton quotes Senate sources re the lame duck session.  Appears as I have suspected that the only legislation that will be passed is a continuing resolution re spending and a temporary extension of low income tax rates for all.  This is despite the President stating he opposes continued low rates for higher earners.  When he says he is willing to “negotiate” on the income tax issues, he means he is ready to capitulate on a temporary extension for all.  Republicans will blink and accept the temporary fix.

Note, no mention of the estate tax.  Further evidence of my belief that it will be lost in the chaos and we will go back to a $1 million exemption and 55 percent rate.  This is despite the fact President and 90 percent of Congress would accept at least a $3.5 million exemption and 45 rate instead.

Interesting times.

By Kevin Staker