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Tuesday, June 13, 2006
Moderately Rich Better Off With Estate Tax
In this excellent article in today's Washington Post, columnist Allan Sloan explains why having an estate tax in place (he uses the 2009 levels as an example) would actually be more beneficial to most wealthy people than repealing the estate tax. He explains this issue in terms of having a stepped-up basis vs. a carry-over basis in place (the article explains it all very clearly).
Sloan, who is taking his information from the nonpartisan Joint Committee on Taxation, explains that wealthy people (the 63,900 who will leave estates between $1.3 million to $3.5 million in 2009) will owe more taxes on assets in 2010 than they will in 2009 because of the way the estate tax law is set up. In fact, it turns out it is actually more financially lucrative for them to have the 2009 estate tax law in place than it would be for them to have full repeal in place, or as it is currently scheduled to be in 2010. He concludes that these 60,000 plus families, many of whom we can assume support estate tax repeal, should be in favor of keeping the estate tax with a stepped-up basis because it is actually more profitable for them. Not to mention it generates significant revenue. He says:
What we shouldn't do is benefit a handful of very rich people by eliminating the estate tax 2010-style at the expense of the small rich and everyone else. We've already made a major mistake by allowing the alternative minimum tax, originally designed to make sure that tax-dodging rich people paid at least something to the IRS, to hit the middle and upper-middle classes but not the truly wealthy. Let's try not to make that same mistake with the estate tax.
Washington Post: Estate Tax Repeal Would Hurt the 'Small Rich'
Posted by Becky Lewis
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