Paul L. Caron

Wednesday, May 12, 2010

Estate Tax Deal in the Works?

The Hill, Kyl: Deal on the Estate Tax in the Offing:

Senate Minority Whip Jon Kyl (R-Ariz.) told reporters on Tuesday that his estate tax proposal is near completion. 

"It is our hope that we can get together both on the proposal, the details are pretty well resolved, and on a process by which we can get it passed as soon as possible," he said. 

Kyl would not disclose the details of his proposals. 

Sources close to the matter told The Hill last week that lawmakers are looking to give taxpayers the option of prepaying their estate tax. The levy would be set at 35% for those worth more than $3.5 million, however the exemption would ultimately increase over time to $5 million and would not be indexed for inflation. Prepayment trusts would pay a lower rate. 

It is unclear how the gift tax would be addressed. Kyl recently told The Hill that he would like the rate to mirror the estate tax.

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Intentionally omission of indexing is becoming a standard feature of tax proposals. The health insurance law's changes had this too. Lawmakers of both parties embrace dishonest tax increases, and the press rarely shines a light on this practice.

Here the intent is clearly to increase the percentage of estates that will have to pay the tax. Once the Fed prints money to repay the Chinese, we will all have $20M estates and pay 35% of it to the government. That $20M will be worth what $200k is today.

Inflation will do what it did in the 1960s, but even more so: The estate tax will become a middle class tax.

The press will describe this as an unintended consequence. It is no such thing. This consequence is 100% intentional, and it's the same for every tax proposal that omits indexing.

Posted by: AMTbuff | May 12, 2010 8:02:54 AM