A Congressional tax standoff has opened a window of opportunity for wealthy Americans determined to avoid paying up post-mortem.
With lawmakers unable to agree on a year-end fix for a quirk in the Bush-era tax cuts, the federal estate tax is set to be repealed for one year as of Jan. 1, meaning that those who suffer a timely death could escape the usual certainty of taxes.
As always the root cause goes back to Bush:
The situation dates to 2001 when Republicans, with President George W. Bush newly ensconced in the White House, sought to realize their goal of eliminating a tax on assets being passed on to heirs. The tax became an iconic issue among Republicans who labeled it the death tax and rallied around its repeal in the mid-1990s during their push to win control of Congress.
Backers of the tax cuts wanted it eliminated altogether. But because that would have proved too costly, Congress instead devised a convoluted scheme that gradually raised the value of estates exempt from the tax and reduced the tax rate to the point — for the next two weeks — that an individual estate valued at $3.5 million or more is taxed at the rate of 45 percent. (This year, the tax will bring in an estimated $25 billion).
At the beginning of the new year, that tax is eliminated entirely, only to be restored in 2011 at a rate of 55 percent on estates of $1 million or more — essentially the law in effect before the 2001 change.
The purpose of the estate tax, of course, is to encourage people like, say George W. Bush, to get out there and make it on your own because we're all about "your own bootstraps" here, and not a country based on nobility.
But that only applies, of course, to poor people.
[via Balloon Juice]