Finally, this past week there is some movement on the estate tax front. On December 6th, President Obama and Republicans tentatively agreed to extend the Bush tax cuts for two years. Included in the compromise was an estate tax exemption amount of $5 million per person and a 35% tax rate. Most experts had expected that, if a compromise was reached, it would be at a $3.5 million per person exemption amount and a 45% tax rate. The Obama compromise fully adopted the Republican position proposed by Senators Kyl and Lincoln for the last couple of years.
Many Democrats are livid with the compromise, particularly the estate tax provision. Even moderate Democrats, such as Congressman Earl Pomeroy, stated they will not support any legislation with a $5 million exemption amount. As Congress begins to consider the compromise this week, expect the Democrats to seek a cut back to $3.5 million. However, the momentum favors passage of the Obama compromise, even with the $5 million exemption amount.
Regardless of the final provisions, assuming there is a Bill signed into law this year, it will cover only 2011 and 2012. Taxpayers will continue to have uncertainty in their estate planning.
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