A good letter to the editor on the estate tax:

This is in response to the Letter writer in Sunday's Journal applauding the elimination of the estate tax. One of the chief arguments of those seeking repeal of the estate tax is that it is hurting farmers whose heirs are forced to sell holdings to pay the taxes. This assertion is more myth than fact.

As one who is involved in the farming industry and has been for years, I fail to see the logic when the exemption is so adequate and keeps rising. Something that I never hear mentioned. The exemption for the estate tax in 2004-2005 was $1.5 million, 2006-2007 it is at $2 million, and for 2009 it rises to $3.5 million. These amounts are for one person, for a couple it would be double. A small parcel of farmers are having to pay this tax.

A common misconception about the Baucus amendment to the budget resolution, which calls for making permanent a handful of the Bush tax cuts, is that it's progressive, that it's a "middle class" tax cut. Indeed, many of the tax cuts it calls for are progressive, including the child tax credit. And it calls for an expansion the State Children's Health Insurance Program (SCHIP), which could be a big boost for low to modest income-earning families.

But some particularly large tax cuts here are very regressive. The amendment calls for making permanent the marriage penalty tax cut, which has been doing away with the marriage penalty for everyone except low income people (See this CBPP brief for more). The Tax Policy Center calculated that 72 percent of the benefits of the marriage penalty break now go to families in the highest 20 percent of the income distribution.

Further, the child tax credit isn't even available for people who make a very low income. And the estate tax measure is regressive, even if it is a better deal than was hoped for prior to the November '06 election.

I don't think anyone's done the math to find if the Baucus amendment, since it's so vague, calls for reducing tax rates more for richer people or for everyone else. But it isn't just a "middle class" tax cut, and there's no reason why almost the entire Senate should have supported it.

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A spokesman at the IRS announced yesterday that Deputy Commissioner Kevin Brown will become acting IRS commissioner May 4. Current Commissioner Mark Everson has accepted a position heading up the American Red Cross (see here and here for more on Everson's departure).

In much the way a senior in college decided to go to graduate school to put off a decision about what to do with their life, the IRS said Brown would only be the acting commissioner for 25 days. For him to continue beyond that time would require White House approval.

I don't know much about Kevin Brown (other than that I believe he pitched for a time for the Rangers and Dodgers and had a wicked sinker), but he has previously served as both counsel and then commissioner of the Small Business/Self-Employed Division at the IRS, which employs almost 44,000 workers and oversees the compliance programs for all individuals and small businesses. It serves 45 million taxpayers.

Brown has also served as chief of staff to Everson, and joined the IRS in 1998 as Assistant to the Commissioner. He also participated in advising the agency during the Restructuring and Reform Act of 1998.

At this point, there is no reason to believe that the White House will not approve of Brown's permanent appointment to be the IRS commissioner.

There's a good Wall Street Journal article today on the importance of estate tax audits. But it's missing some critical context. On one of the people in the story, a former estate tax auditor:

Ms. New started auditing estate-tax returns in the IRS's Detroit office in the 1980s. She managed an estate-tax group from 2001 until early this year, when she took a buyout and went into private practice.

At the end of last year, IRS offered early retirement buyouts to nearly half of all estate tax auditors. Ms. New may not have taken this particular offer, but the timing certainly raise quesitons in my mind about whether her retirement was part of a larger event. The article should have included this information.

IRS cannot do as many of these audits anymore, now that so many estate tax auditors have taken buyouts. This point seems relevant enough to include in an article about how some heirs would game the system were it not for diligent estate tax audits.

Posted by Matt Lewis, 10:42:46 AM