BY DR. MERRILL MATTHEWS — If you have even a moderate-sized estate or business, and you are callous enough to want to leave a financial legacy to your children, you have three months to die. I know that sounds harsh, but after nearly two years under Team Obama harsh reality is the new normal.
It appears that Congress will leave Washington for the mid-term election break without doing anything about the estate tax, or about any of those “Bush tax cuts” that the Democrats don’t want to renew — at least for higher income folks.
If Congress fails to address the issue, on January 1 the estate tax rate will skyrocket from zero to 55 percent on estates valued at more than $1 million.
Yes, a lame duck Congress coming back after the election could pass an extension of the estate tax. But if Republicans win big — as many expect, at least in the House — the Democrats will be in disarray and may find it difficult to do anything.
And Republicans would have little incentive to agree to a Democratic compromise because within a few weeks they would have the majority and could pass legislation to end the estate tax permanently.
President Obama might veto such legislation, urging Congress instead to pass his proposal last summer to return the estate tax to the 2009 level, 45 percent on assets exceeding $3.5 million.
However, given the anti-Obama sentiment in the country, compromising with the president would be roundly criticized by conservatives and the Tea Parties — who will be there post-election to remind Republicans of their campaign promises if their memories start to slip.
Of course, a good case could be, and has been, made about the economic benefits from ending the estate tax. But more importantly, it’s the moral thing to do. Money and assets that people have worked and saved for and paid taxes on belongs to them. And they should be able to allocate it at death as they see fit.
Karl Marx saw all property as belonging to state. Hence the third plank in the Communist Manifesto (1848) was the “abolition of all rights of inheritance.” President Obama wants to meet Marx half way; Republicans should firmly declare no way.
Dr. Merrill Matthews is an Institute for Policy Innovation Scholar.
TaxBytes is published weekly by the Institute for Policy Innovation. For more information: http://www.ipi.org