Yesterday the House passed legislation that will undo the estate tax break that President Bush had enacted. The basic plan from the Bush years was that it the estate tax would gradually decrease until next year when it would be eliminated all together. The caveat is that it had a sunset provision of 2011, after which time it would revert back to previous rate of 55%.
Yes that is right when you die the government can come in and seize over half of your assets. There are plenty of formulas to figure out just exactly how much the rate is and what percentage a person would pay, but the 55% rate was the top rate and 37% was the low end.
Well the Dems led by Nancy Pelosi are trying to undo all of that and punishing your kids even more then they are already being punished with all of the spending that this administration is doing.
House Democrats passed a freeze of the estate tax Thursday, making permanent the 45 percent rate on inheritances of more than $3.5 million and undoing part of President George W. Bush's cuts that would have temporarily eliminated the tax next year.
The measure would prevent the estate tax from expiring Dec. 31 and returning in 2011 at a 55 percent rate, a mechanism of the Bush tax cuts that gradually reduced the rate since 2001. Estates under $3.5 million are exempt for individuals and up to $7 million for married couples, leaving about 1 percent of all estates vulnerable to the tax.
Now I know I lot of you are saying you have nothing to worry about since you don't have that much of an estate. Let me tell you, yes you do. I discovered this the hard way with the passing of parents. The bean counters swooped in and counted everything they had as an asset. Their house, their car, all the furnishings, any bank accounts and any other holdings. So while my parents always liked to refer to themselves as the "working poor", when they passed away you would have thought they were Bill Gates illegitimate siblings.
Here is an explanation of this so-called death tax that I found to be helpful to explain what this estate tax is about.
Included in President Bush's tax cuts, however, was a provision to phase out the estate tax rate over the next few years. For families with large real estate holdings such as farms that have been held for generations or small businesses, this stroke of good luck will ensure that assets are passed onto posterity without Uncle Sam taking a majority of the bounty. This would be accomplished in two ways: 1.) by raising the amount exempt from the estate tax rate, and 2.) lowering the estate tax rate itself.
According to the IRS literature, an estate tax filing need only be made if the value of an estate exceeds the following amounts:
2005: First $1,500,000 in assets
2006-2008: First $2,000,000 in assets
2009: First $3,500,000 in assets
In addition, the maximum estate tax rate applied to the amounts in excess of these figures are as follows:
2005: 47 percent
2006: 46 percent
2007- 2009: 45 percent
In 2010, the estate tax rate drops to zero percent; if you die in that year, your heirs would not pay taxes, even if you passed on $20 billion!
Of course you know how the Democrats are going to portray this as some sort of win for the average American. All this is designed to do is make sure that San Fran Nan has plenty of money for her flower budget.
"This bill is good for small businesses, good for farmers and good for our nation's families, providing them with some certainty and stability during uncertain times," said House Speaker Nancy Pelosi, California Democrat.
She said the bill restored "fundamental fairness" to the tax code and did so adhering to Democrats' pledge that Congress would "pay as you go" for new spending measures.
There we see the Dems favorite word, "fairness" again and if by good for small business and farmers you mean it will drive them right into the poor house and stifle anybody from wanting to start a new business, then yeah it is good.
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