California Estate Planning Blog by Kevin Staker

December 12, 2012

Prediction: Republicans Will Cave and Pass the Middle Class Tax Cut Act

My prior post appears to be correct. See the great article in Politico by By MANU RAJU and JAKE SHERMAN,

The President in asking for too much in concessions from the Republicans. They however know it is political suicide to stick to their guns and allow the Bush Tax Cuts to expire for everyone. They will wait to fight the fight over entitlements next year when the debt ceiling issue arises. The Middle Class Tax Cut Act has already been passed by the Senate. I predict the House will pass before the start of 2013.

This is all very sad. The President has the opportunity to reach the “Grand Bargain” with the Republicans and save ourselves from our own living beyond our means. The Republicans could have gotten something in exchange for the inevitable increase in tax rates on the wealthy. For once, the President has been a tough negotiator but he is failing to step beyond and be a great president.

What are they really arguing about? Evan Soltas  at Bloomberg states the following:

Looking more closely at the cost of the income-tax provisions in 2013, the cuts to upper-income brackets are worth $52 billion, to middle-income brackets $84 billion, and to lower-income brackets $55 billion, according to an Economic Policy Institute study. Over the long term, allowing the 2001 tax cuts on upper-income-tax brackets to expire may increase revenue by $297 billion over the next five years and $824 billion over the next 10, according to the Congressional Budget Office.  (see

So The Republicans and the President are really arguing over only $52 billion next year.  A drop in the bucket in relation to another $1 trillion deficit.

And the estate tax? An orphaned step child. I predict there will be no agreement before 2013. However, when they do settle the debt ceiling increase, it will be part of that settlement and will be retroactive. However, hard to predict whether the estate tax exemption will be the $3,500,000.or the $5,120,000 adjusted for inflation. However, I believe the gift tax exemption will go down to $1,000,000.

We shall see

Kevin Staker
Estate Tax News Blog


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