Are Estate Taxes Gone Except for the Super Rich?
Some of the Super Rich Push for Higher Estate Taxes
It may seem hard to believe and somewhat implausible, but some of the super rich have actually made calls upon Congress to encourage passage of legislation that strengthens and even increases the estate tax. That's right—rich people actually seeking to pay higher and more taxes. Surely that must be a typo or misprint, right?. But it is not.
Why Do Some Super Rich Seek Legislation Setting Higher Estate Taxes?
The AFL-CIO leadership, grand-niece of Walt Disney, former hedge fund managers, and the former head of Citigroup joined in the call upon Congress organized by the liberal organization, United for a Fair Economy. These individuals were committed to making the pitch to Congress to set higher federal estate taxes. They sought enactment of legislation to restore taxes to the stronger levels of 2009, if not to even higher levels going forward.
The only caveat is that these are the super rich. They are not just mere millionaires, but multimillionaires, if not billionaires, with high profiles and even higher net worth. To put things into perspective in dollars and cents, less than 1 percent of all estates in the nation would be subject to these proposed tax levels. But why make such a request? Don't the wealthy stay wealthy by keeping their money instead of paying it to the government in the form of taxes? Or, as Warren Buffett and Bill Gates propose, why not give half to charity to circumvent huge tax burdens on their heirs?
The group posited that a strong estate tax in our society assists in avoiding the accumulation and amassing of significant stashes of inherited wealth and the political power that frequently accompanies such money. To them, the needs of a democratic society are best met when wealth is not accumulated in the hands of a few to the detriment of government programs (such as infrastructure and defense) that can benefit many.
Why Was the Federal Estate Tax in Such a State of Flux?
Another big shock to many is that Congress actually allowed the estate tax to expire and lapse for the period of a year, then to fall into a state of limbo. What happened to the tax? The federal estate tax was repealed on January 1, 2010. Then, on December 17, 2010, President Obama signed the Tax Relief Act, making it the official law of the land. The Tax Relief Act reinstated the estate tax on a retroactive basis back to January 1, 2010 (for the period of one year). The Act also established new rules for estates of those who die in 2011-2012.
What Is Next for the Federal Estate Tax?
The act is scheduled to sunset on December 31, 2012. Accordingly, in 2013, the estate tax laws are to revert to the status of laws that were in place a decade ago in 2001 to 2002. Those 2001 levels are not popular with some, at $1 million for the exemption from federal estate taxes and a top tax rate of 55 percent. In the meantime, the debate continues over what tax rate and exemption level is best suited for the needs of the country, especially given the nation's current fiscal crisis and economic challenges.