California Estate Planning Blog by Kevin Staker

November 21, 2010

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

Filed under: estate tax,Kevin Staker — Kevin Staker @ 11:05 pm
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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

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3 Comments »

  1. Although I agree with your estimates, I strongly disagree with your presumption that there’s some reasonable estate tax level greater than zero.

    You apparently don’t know how insanely profligate US government spending is. Take a look at:

    http://www.rd.com/your-america-inspiring-people-and-stories/insane-government-spending/article32983.html
    or
    http://www.thefreeenterprisenation.org/FENI/media/Docs/Unrestrained-Spending-Debt-and-Taxes.pdf
    or Ron Paul at

    The $3 billion annual estate tax revenue (2009 rules) cost more to administer than it collects, especially given the near-certainty of rule changes in 2011.

    People like you (and the apparently senile Warren Buffet, whose estate is almost completely sheltered by the Gates Foundation) seem to be worried about the deficit of 1.4 trillion in 2009 and $3.5 trillion in 2010. Do you have ANY idea how large 3.5 trillion is? Neither do I, but this helps: 3.5 trillion seconds ago, Homo Sapiens and Neanderthals were at war and raping each other’s women.

    But $3.5T doesn’t include unfunded liabilities. If the IRS raised the tax rate to 100% for 10 years, the government would still be bankrupt. If the government cut ALL government spending (except Social Security and Medicare) for a decade, we’d still be bankrupt. Taxes simply don’t matter unless SS and Medicare/Obamacare are fixed. You’re hoping for a rearrangement of the deckchairs on the Titanic.

    Comment by Jack Mitchell — November 22, 2010 @ 4:41 am | Reply

    • Actually I do not believe I have ever shared on this blog my opinion on the estate tax itself. You might be confused by my opinion that the estate tax will not be repealed. That is simply my opinion of the political situation, not my opinion on whether or not it should be repealed.

      I absolutely agree with you that we (it is our government if you think about it) are spending too much

      Just trying to “call it like I see it”

      Thanks for the comment.

      Kevin Staker

      Comment by kevinstaker — November 22, 2010 @ 5:06 pm | Reply

  2. I am 100% sure that there will be no compromise and that we will see a $1 million exemption and a 55% rate on January 1.

    However, last year at this time I was 100% sure that there would be a last minute reinstating of the 2009 rules for 2010 and repeal wouldn’t happen, so my track record isn’t that good.

    Comment by David Shulman — November 22, 2010 @ 2:39 pm | Reply


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