My thoughts on the future of the federal estate tax
In 2001, President Bush and a Republican-controlled Congress enacted a law that greatly reduced and will eventually eliminated the federal estate tax. The catch is, the law sunsets after ten years, meaning that in 2011, the laws governing the federal estate tax will be as those laws existed in 2001.
Since passing the 2001 law, the Republicans attempted on many occasions to pass a bill that would permit the permanent repeal of the estate tax. President Bush indicated that if such a bill made it out of Congress, he would sign the bill into law. I’ve written about this topic many times, as have many other commentators. What breaths new life into this subject is the fact that the Democrats now control the Congress, and Democrats have consistently indicated that the estate tax is an excellent way in which the federal government can raise revenue. You might think that being an elder law attorney-and a part of the general practice of elder law is estate planning – I want the estate tax to remain in existence.
After all, if people are fearful that their estates will pay tax when they die, causing their children to receive less of an inheritance, then more people will come to me for estate planning. Well, that’s somewhat true. I have plenty of clients who need to engage in estate planning whether the federal estate tax exists or not.
So, with that little disclaimer, here are my thoughts on the federal estate tax and my opinion as to its future. As much as we all don’t like it, a government raises money for the services that it provides one way, it levies a tax against its citizens. To some extent, all taxes are arbitrary. For instance, with regard to income tax, we have a graduated system where the more money you make the higher a percentage of your earnings you pay as income tax; however, that percentage caps at a certain amount of earnings and never increases. To most of us, this system of taxation seems somewhat fair; however, other countries place a much higher emphasis on sales and use taxes. What this shows is, governments can raise money through different forms of taxation and no one method is the correct method.
Some have argued that the current income tax code is to complex, which adds to its burden. These folks want to replace it with a federal sales and use tax. There is some merit in this but, given the vested interests, such a radical change will be difficult.
My thoughts are that the federal estate tax will be alive and well following 2011.
Your post federal estate tax | The Legal Fixer was very interesting when I found it over google on Monday by my search for lawyer tax. I have your blog now in my bookmarks and I visit your blog again, soon. Take care.