Obama tax deal a big gift for America's rich
By Joseph Giannone
Column appeared on Reuters.com, December 7, 2010
More than 40,000 ultra-rich Americans may have another reason to celebrate the holiday season if President Barack Obama's latest estate tax proposals are passed by Congress.
Obama struck an agreement on Monday with congressional leaders on a range of tax issues, including cutting the estate tax to 35 percent and raising the individual exemption to $5 million. The estate tax, which expired this year, is due to return in 2011 at 55 percent with a $1 million exemption.
If the compromise proposal is passed, roughly 40,700 families will avoid an estimated $23.2 billion of estate taxes next year, according to the Urban-Brookings Institute Tax Policy Center. Around 3,500 families would pay an estimated $11.2 billion in estate taxes.
"They're making the estate tax weaker than it has been for more than seven decades. This is a real mistake," said Lee Farris, who follows estate taxes for United for a Fair Economy, a group advocating progressive tax policy. "Obama also puts himself in a bad position to negotiate the tax in two years."
Obama agreed to extend all Bush-era tax cuts for two years, yielding to Republicans, who won big in mid-term elections. The preliminary agreement would renew tax cuts for the middle class, as well as the wealthiest Americans.
"You knew Congress was not going to let the Bush tax cuts expire. There are too many millionaires there," Ray Madoff, a Boston College law professor and expert on trusts and estates. "This helps an absolutely tiny, tiny portion of the wealthiest people who are passing billions to their heirs tax-free."
Tax experts now estimate that less than one in 400 families will pay the estate tax, the fewest since the Depression.
The estate tax was not the only gift for the wealthy in Obama's plan.
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