Throw grandma down the well
By The current estate tax mess is a story of almost mind-numbing greed and legislative incompetence. A quick summary: In 2001 Congress greatly decreased the (already tiny) number of estates subject to taxation, by gradually raising the exemption to its current level of $3.5 million per individual ($7 million per married couple), while lowering the tax rate on the non-exempt portion of estates from 55% to 45%. This by far the most progressive tax in American law, as it currently affects less than 1% of taxpayers while raising, even at the current radically reduced rates, tens of billions per year.
Because of various procedural manuevers, the law was scheduled to sunset in 2010, and then spring back to legal life in 2011, at the 2001 rates (individual exemption of $1 million/$2 million for married couples; 55% rate). This meant that if nothing was done there would be no estate tax in 2010. For the No Billionaire Left Behind wing of the GOP, this created a long lusted-after opportunity to eliminate the tax altogether (at a modest estimated cost of $1.3 trillion over the first decade after elimination, i.e. the price of one extra medium-sized Middle East war, which explains why the Neocon wing has been quietly opposing repeal. Or, if you prefer, the cost of one health care reform bill).
Still, nobody outside one of Grover Norquist’s more elaborate onanistic fantasies really believed the tax would be allowed to lapse altogether. A couple of weeks ago the House voted to make the 2009 rates permanent, with every single Republican present voting no (along with 26 Democrats).
Well today the Senate refused to go along, meaning that as of now there will be no estate tax next year. (One ironic consequence of this is that instead of subjecting a tiny handful of families to estate taxes, the disappearance of the tax will impose capital gains taxes on more than 60,000 heirs who would otherwise avoid them, thus proving that our leaders remain willing to tax the sort of rich if the only alternative is taxing the ultra-rich).
Blanche Lincoln and Jon Kyl are working on a compromise proposal that will raise the estate tax exemptions to $5 million individual/$10 million married couple with a 35% rate beyond that, but it now looks like any such measure will have to be applied retroactively to 2010 estates — a move which seems likely to trigger quite a few lawsuits. So at least trusts and estates lawyers (not to mention their richest clients) will be happy.