California Estate Planning Blog by Kevin Staker

December 5, 2012

Behind the Scenes Thoughts in Congress Arising Regarding the Estate Tax

Reuters is reporting unnamed aides to members of Congress are discussing what a settlement of the Fiscal Cliff will look like. In other words, the Republican aides are talking about what is likely to happen. It appears this author is correct in that the Republicans are coming to understand they are going to lose on the extension of the income tax cuts for the upper income.

The following is a quote on the likely items in the settlement:

But the real proposal – one that would be presented to the full House and Senate for passage this month – could involve letting tax rates rise on the highest income earners, although maybe not to as high a level as Obama is demanding, according to aides. It could be coupled with extending low estate taxes and protecting middle-income people from being thrown into a tax level intended for the rich.

The Reuters article by Richard Cowan can be found at http://www.reuters.com/article/2012/12/05/us-usa-fiscal-republicans-idUSBRE8B218T20121205.

In addition, Heidi Przybyla at Business Week is reporting some Republican members on Congress have signed a letter “calling for exploration of  ‘all options’ on taxes and entitlement programs, a signal that some rank-and-file members are ready to bargain.”  See http://www.businessweek.com/news/2012-12-05/republican-defectors-ready-to-back-tax-rate-compromise  Hence, one assumes the estate tax would be addressed in their dealing with the “options”.

I believe Obama will get the income tax rates he wants.  This is a no-win situation for the Republicans.  All they can do is see how many concessions on spending they can get out of Obama if they give up on the Bush tax cut extension for the upper income.  Pres. Obama has shown himself such a poor negotiator they will surely get something significant from him if they settle before the end of the year.  After that, the Republicans will have less leverage.

I believe in such a settlement they may even get an extension of the $5,120,000 estate and gift tax exemptions and 35 percent rate.  However, if Obama is tough, he will stick with the 2009 rules of $3,500,000 exemptions with a 45 percent top rate.  The Republicans will not hold up the settlement if they get at least that much.

Kevin Staker
Estate Tax News Blog

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