Estate Taxes

The Estate Tax Debate

Since Congress changed the tax laws, there has been much debate about whether this is a good plan or not. Learn more about this here.

You may not realize that there is an estate tax debate that is currently ongoing in our government. When President George W. Bush entered office, phasing out the estate tax was a top priority for him. This resulted in the 2001 tax law, which will eliminate estate tax in 2010. A big part of this estate tax debate is that, in 2011, if Congress does not take action, the estate tax will come back into existence.

On one side of the estate tax debate, supporters who are leading the pack to keep the estate tax on the books say that eliminating the tax does have some pitfalls. Some of the opponents in the debate include Bill Gates, Sr., father of the founder of Microsoft, and Chuck Collins, heir to the Oscar Meyer fortune.

This debate continues to be strong because the problem with eliminating the estate tax, say the detractors, is that it affects state budgets, which are already struggling to make ends meet. Their other concern is that financial empires that are not redistributed will concentrate political and economic power among a select privileged few, and they do not want this.

Family business owners, on the other hand, applauded the decision to end the tax. Estate taxes force many families to sell farms or businesses solely so the heirs can pay the estate tax on it. So the estate tax debate continues on.

Whether you are for it or against it, the phasing out of the estate tax means that fewer people will owe the levy as the unified exemption continues to rise and the law is phased out in 2010. What happens then is anyone’s guess. If Congress does not take action in 2010, the law returns on Jan. 1, 2011, with a $1 million exemption and a 55 percent tax rate. Economic and political factors (including who is elected to presidency in 2008) will determine what estate tax law will look like in 2011, and with national and world affairs as tumultuous as they are, it’s impossible to say what will happen.

However, with good estate planning, regardless of what comes of the estate tax debate, or what Congress does or doesn’t do, the law will have less of an impact on you.