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.
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