Here is why:
There is an increasing possibility that the President and the Republicans will not reach agreement on averting the “fiscal cliff”. We will likely get to the end of 2012 and one of two things will happen.
The first, and I believe more likely, is that the two sides will fail to estate agreement on anything, including the estate tax fix. We will wake up on January 1, 2013, and we will technically have a $1,000,000 estate tax and gift tax exemptions. The President is quite rightly playing hard ball now (he he has been inept in the past) because he knows on January 1 he can say the following: “Income tax rates have now gone up for everyone. I propose lowering them for 98 percent of the taxpayers. The Republicans are preventing you, the 98 percent, from getting a tax cut because they are holding out for their rich campaign contributors.”
Ouch. He will be right. The calls from constituents will soon turn into a deluge into the offices of Republican members of Congressmen demanding they agree to the tax cuts for the 98 percent. In the rush to comply, I would not be surprised to see the Republicans in Congress panic and quickly fold. They would give in to the income tax cuts and get nothing in return, including an estate tax exemption higher than $1,000,000 (maybe the $3,500,000 exemption Obama says he wants might get slipped in).
The second possibility is the same thing but it happens before January 1st. However, because it takes so long to get anything passed in the Senate because of its arcane procedures, the only vehicle available would be Senate Bill 3412 , the Middle Class Cut Tax Act, already passed by the Senate. It fails to address the estate tax and gift tax issues and so would result in the $1,000,000 exemptions coming into being on January 1st. One Republican, who is even one of their leaders, Rep. Cole has said he favors the House immediately passing the Senate bill. See http://www.cnn.com/2012/12/03/politics/fiscal-cliff/index.html. However, he did say he would follow the instructions otherwise of Speaker Boehner.
Even if all of this happens, I still believe we will end up with at least $3,500,000 exemptions, President Obama and more importantly the major campaign contributors to Congress want at least such an amount. Moreever, even many Democrats do not want a $3,5000 estate tax exemption, much less a $1,000,000 estate tax exemption. Kim Dixon at Reuters has an excellent article on the history and present status of the estate tax debate. This article can be found at http://www.reuters.com/article/2012/11/30/us-usa-fiscal-estatetax-idUSBRE8AT09I20121130
Therefore, it looks like we do have more than an insignificant chance we will end up with $1,000,000 estate tax and gift tax exemptions.
Estate Tax News Blog