The Year to Drop Dead
As 2010 begins we find ourselves without an estate tax and that is the good news to many Americans, especially those in agriculture. Until last Friday, the government took 45 percent of individual estates valued at $3.5 million or more. Now, unless Congress acts in 2010, and we assume they will, the tax will be revived next Jan. 1, 2011 at a higher rate – 55 percent on estates of $1 million or more.
As we all know, these days it doesn’t take much land to be worth a million dollars and, as most of us are in agriculture – land rich, cash poor – it really puts a burden upon everyone. The good part is that with good estate planning the family can still survive. Even without estate taxes one needs to plan for your family after you’re gone, it just seems un-American to have a “death tax.”
In early December the U.S. House approved the Permanent Estate Tax Relief Bill, which would have capped the estate tax at its current 45 percent rate on estates larger than $3.5 million, and $7 million per couple. The Senate wasn’t able to come up with the 60 votes to pass the bill. Now some in Congress want an estate tax bill retroactive to the first of this year, which some say is unconstitutional.
The most dangerous part of all in this issue is the thought process of some Americans. It seems that we are in a “sharing the wealth” mode these days. I was watching a program the other day where people thought that the estate tax was just a tax to eliminate dynastic wealth. That is, those with wealth were supposed to give America their dollars after death instead of their heirs. Kind of a socialistic way of thinking, isn’t it? But these people were dead serious and were used to living their lives on handouts from the government.
The last estate tax bill was written in the ‘80s as a tax on dying rather than wealth and it put farms, ranches and small businesses front and center. The movement was able to separate the cause from the issue of dynastic wealth and it broadened its appeal to Main Street advocates. Then in 2001, with huge national budget surpluses, President Bush pushed and Congress passed an estate tax repeal. To win the necessary votes for the larger $1.35 trillion tax cut, of which it was a part, Republican leaders used legislation tactics that mandated the entire tax package expire in 2010 and, to lower the 10-year cost, the estate tax didn’t begin dropping significantly until the end of the decade and wouldn’t disappear until 2010.
As was quoted by one small business lobbyist, “the very wealthy, in their quest to reduce their exposure, made proposals that threw the small business community overboard,” referring to a move to have estates taxed as capital gains upon their disposition, without regard to the amount shielded from taxation.
So here we are with politics shifting and Congress looking for dollars. Who knows what is going to happen, but I’m not dying to give the ranch to Congress.