President Addresses Estate Tax on Bus Tour
At the final stop of his economic bus tour in Alpha, Illinois, the President fielded a question on August 17 from a family farmer concerned about the potential return of a higher estate tax in 2013:
Farmer: Thank you, Mr. President, for being here today in Henry County. My name is Karen Urich. I’m a multigenerational farmer, member of the Henry County Board and Henry County Farm Bureau. My question that I have today is I have a concern over estate taxes. In 2013, if the Senate and the Congress fails to act, we will have our estate taxes go back to the 2001 level. We have family farms that are experiencing having to sell their land in order to pay the property taxes. And I was wondering what you see for the future of the estate tax. Thank you.
President: Well, there’s no reason why we have to go all the way back to the 2001 level. There is a compromise that has been discussed where you’d essentially have a $7 million exemption per family. There are some folks who just want to eliminate the estate tax altogether. There are others who want to hike it up back to 2001. There’s a mid-level proposal that would exempt most – almost all – family farms and nevertheless would still hit folks like Warren Buffett and make sure that he is able to pay what he wants to pay in terms of passing on something not only to his family, but also to the country that has blessed him so much. So this is going to be part of the larger debate we have about the tax code.… (more at http://whitehouse.blogs.cnn.com/2011/08/17/obama-talks-estate-tax-at-final-bus-tour-stop/).
When Congress considers an extension of the 2010 Tax Act, which is currently unlikely to be a part of the joint committee’s deficit reduction effort in 2011 but is expected to be a key focus in 2012, the President and leading Democrats intend to press for a return to 2009 parameters (higher 45% rate and lower $3.5 million exemption).
Many Republicans and a few Democrats seek to fully repeal the tax. While such a proposal could pass the House, it stands extremely little chance of being signed into law during the 112th Congress. If nothing happens, the tax will skyrocket to a 55% rate on all assets over $1 million.
Policy and Taxation Group continues to argue that the middle ground is not increasing estate tax burden on struggling family businesses, but improving on the 2010 Tax Act – at the minimum protecting and building upon the current middle ground of a 35% rate and $5 million exemption indexed for inflation. In the previous overwhelmingly Democratic-controlled Congress, both chambers went on record expressing their preference for 35/5 as opposed to 45/3.5. Policy and Taxation Group will continue to press to move the center of the debate in the right direction to increase the prospects for sustainable estate tax relief.