California Estate Planning Blog by Kevin Staker

December 29, 2012

Estate Tax Reportedly Important Part of Fiscal Cliff Negotiations

Several sources report the estate tax is an important part of the Fiscal Cliff negotiations.

Ted Barrett and Greg Botelho, at CNN report the following:

Democrats believe Republicans should make the “first move” — basically by saying what changes should be made to the president’s proposal, which calls for tax rates to stay the same for all annual family income below $250,000. The expectation is that Republicans will try to raise that income threshold to $400,000 and push to keep estate taxes low; Democrats said they might be open to one such scenario, but not both.

See http://www.cnn.com/2012/12/29/politics/fiscal-cliff/index.html?hpt=hp_t1

Lisa Mascaro and Kathleen Hennessey at the L. A. Times report:

One key aim for negotiators is to find an income threshold that could draw enough Republican support for Boehner to win over a majority of his caucus — 120 members — while attracting the remaining Democrats needed for passage. Boehner has resisted bringing a bill to the floor without the support of most House Republicans.

Another point of contention has been the level for estate taxes. Republicans want to keep the current 35% tax rate on estates worth more than $5 million. Many Democrats want a 45% rate on estates worth more than $3.5 million. If Congress does not act, the tax automatically reverts to its 1990s level of 55% on estates worth more than $1 million.

“There are certain things in which you begin losing a lot of real votes quickly, including mine — and fussing with the estate tax is one of them,” said retiring Sen. Jon Kyl of Arizona, the second-ranking Senate Republican.

See http://www.latimes.com/news/nationworld/nation/la-na-fiscal-cliff-20121229,0,478384.story

Manu Raju also reports the leaders of the two parties in the Senate, Reid and McConnell, have the estate tax as one of the issues they will try to resolve.  See http://www.politico.com/story/2012/12/fiscal-cliff-lawmakers-predict-no-deal-out-of-wh-meeting-85565.html

Jared Bernstein at the Huffington Post reports the same at http://www.huffingtonpost.com/jared-bernstein/fiscal-cliff-the-next-few_b_2380737.html

David Welna at NPR reports that Senate Majority Leader, Democrat, Harry Reid would propose a bill to avoid the Fiscal Cliff:

That legislation would extend expiring tax cuts only for household income below $250,000 and include other unspecified provisions that Reid said the president wanted; among them is likely an extension of emergency unemployment benefits that would otherwise expire.

Reid indicated he was willing to see that bill changed in negotiations with McConnell. Republicans want tax cuts extended for income higher than $250,000, they want no increase in the estate tax, and they do not want the top tax rate to go back up near 40 percent.

See http://www.npr.org/blogs/itsallpolitics/2012/12/29/168244940/congressional-leaders-hopeful-of-deal-on-fiscal-cliff-as-deadline-nears

Dan Weil at Newsmax confirms my prior comment that several Democratic senators are in favor of extending the present estate and related exemptions of over $5,000,000. See http://www.newsmax.com/Newsfront/estate-tax-fiscal-cliff/2012/12/28/id/469320

I repeat my prediction.  The Republicans care more about the estate tax than the Democrats.  When this is settled and it will be settled, it is only a matter of time, the President will get an increase in tax rates on some higher income folk and the Republicans will get an extension of the present estate and related tax laws (with maybe only a $1,000,000 gift tax exemption).

A report at Associated Press by David Espo and Jim Kuhnhenn confirms my view:

Democrats said Obama was sticking to his campaign call for increases above $250,000 in annual income, even though in recent negotiations he said he could accept $400,000.

The two sides also confronted a divide over estate taxes.

Obama favors a higher tax than is currently in effect, but one senior Republican, Sen. Jon Kyl of Arizona, said he’s “totally dead set” against it. Speaking of fellow GOP lawmakers, he said they harbor more opposition to an increase in the estate tax than to letting taxes on income and investments rise at upper levels.

See http://bigstory.ap.org/article/white-house-meeting-last-stab-fiscal-deal

Note, Senator Kyl was the driving force the last go around in December 2010 behind our present high estate tax exemption and other provisions of the law favorable to wealthy taxpayers.  He may be retiring but he is still the Senate Republican Whip, a very powerful participant in the negotiations going on in the U.S. Senate as I write this post.  Just watch, he will get almost all he wants.

We shall see.

Kevin Staker

Estate Tax News Blog

Advertisements

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: