 |
New Challenges on Exemption
Obama Jobs Initiative – On September 8, the President addressed a joint session of Congress to lay out his $447 billion plan intended to spur job growth. The outline would offer what Politico has called a “mix of tax cuts, state aid, jobs programs and construction projects” to be paid for at least partly by increased taxes on higher income Americans. The estate tax was not specifically mentioned. Expectations are low that the entire plan will be palatable to Republican leaders, although House Speaker John Boehner (R-OH) noted the President’s ideas “merit consideration” and expressed his hope the President would consider GOP ideas as well.
Deficit Reduction and Estate Tax – Also on September 8, the Joint Committee gathered for its first meeting toward identifying at least $1.2 trillion in deficit savings. House Ways and Means Committee Democrats released their recommendations for changes to the tax code to raise additional revenue, which include several harmful estate tax increases. Their proposal would eliminate valuation discounts, restrict grantor-retained annuity trusts (GRATs), increase reporting requirements for smaller estates and revert to a $3.5 million exemption in 2012, one year before the 2010 Tax Act expires.
This is the first time an exemption reversion has noticeably appeared in a legislative proposal. It is unclear whether their proposal would include a “claw-back” for those who have already used their entire current $5 million exemption for gifts, but opposition to such a move would likely be fierce. However, families are wise to pay heightened attention to the increasing potential risk in this area.
While House Democratic leaders continue to argue for a return to a higher 45% rate and lower $3.5 million exemption in 2013, such proposals are not likely to be considered by the Joint Committee because the panel is using a current law baseline (meaning most changes to the expiring provisions of the 2010 Tax Act would be viewed only as costing more in 2013 and beyond, undermining the goal of deficit reduction). Instead, legislative action related to extension of the 2010 Tax Act is likely to occur in 2012 and, perhaps, 2013.
|
