Paul L. Caron

Thursday, January 26, 2006

Grassley: Low-Rate Estate Tax, Not Repeal, "Best I Can Do"

Interesting article this afternoon from Bloomberg:  Low-Rate Estate Tax, Not Repeal, "Best I Can Do," Grassley Says, by Ryan J. Donmoyer & Mike McKee:

Congressional Republicans don't have enough votes to extend a repeal of the estate tax beyond 2010 and may have to settle for a compromise that limits the levy to bequests of more than $5 million, Senator Charles Grassley said. "If we could get a $5 million exemption with a 15 percent rate, I think that would be a decent compromise," Grassley, an Iowa Republican who heads the finance committee, said in an interview . "That's not going to satisfy the president, but I think that that's the best I can do in the United States Senate in order to get the votes to get it passed."

Republican leaders including Arizona Senator Jon Kyl and Majority Leader Bill Frist were forced to postpone a vote on permanently abolishing the tax in July when Hurricane Katrina devastated the Gulf Coast. Republicans said they were worried about creating the perception they were cutting taxes for wealthy families while mostly poor hurricane survivors struggled.

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Tracked on Jan 27, 2006 5:54:14 AM

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This proposal would have a profound effect on estate planning practice. Very few estates would be paying estate tax, and the tax, if payable, would be a modest one. Wills and trusts would tend to be drafted in order to move property in accordance with the desires of the family members, and not for tax planning purposes. I would predict that the work would become more of a generalist's job than a tax specialist's.

Posted by: The NJ Annuitant | Jan 29, 2006 11:37:29 AM

Estate planning around the estate and gift tax would become a truely boutique - type practice. A five million dollar exemption coupled with a 15 percent rate of tax would do two things: first, it would exclude the vast majority of estates from the reach of the estate tax; and second, it would reduce the value of estate tax planning, because the tax rate would be so low. For the vast majority of Americans, estate planning would become an exercise in accomplishing family wealth distribution goals rather than tax avoidance.

Posted by: The NJ Annuitant | Jan 26, 2006 7:50:32 PM