Once again, it’s time to talk about the federal estate and gift tax. Are you ready? Because some of the wealthiest Americans sure are.
In early December, a letter submitted to Congress by America’s richest including Warren Buffett, Bill Gates, and George Soros asked for a “significant tax on large estates when they are passed on to the next generation.” Other signees are Richard Rockefeller, former President Jimmy Carter, and Abigail Disney.
The group was organized by Responsible Wealth, “a network of business leaders, investors, and inheritors in the richest five percent of wealth and/or income in the U.S. who believe that growing inequality is not in their best interest, nor in the best interest of society.” They are urging Congress to consider a “responsible estate tax proposal as part of fiscal cliff discussions;” overall, the group favors progressive taxes.
What’s all this fuss about?
As we discussed in the 2011 Estate Tax Update, in 2011, an individual could
use the $5 million estate and gift tax exemption by giving gifts during life, bequests after death, or a combination thereof. The . . . tax rate for all types of gifts or bequests is 35%. . . .
[But] unless Congress takes action, in 2013, the tax rates and exemptions will return to their pre-2001 statuses, i.e., a unified exemption for estate and gift taxes at $1 million and a GST exemption of $1 million (indexed for inflation) with a tax rate of 55% for all three.
And that is, of course, a huge difference in the amount of taxes that some individual estates could face.
Aside from keeping the current rate and limit, Congress has several options to consider including President Obama’s preference of going back to the 2009 provisions ($3.5 million exemption and a 45 percent tax rate) and eliminating any tax on estates altogether — the latter is, of course, something “anti-death tax” people would prefer.
An excellent article at Forbes includes a link to the non-partisan Tax Policy Center’s tables, showing how the various policies would affect different estates as well as how much revenue the government would collect under each.
Both the tables and the full article at Forbes are worth checking out.
For now, though, we wait. And as soon as anything happens (if anything) on the estate tax, we’ll be sure to let you know.