As the Congressional leaders and President Obama wrangle over income tax rates, another looming tax hike has been overlooked.
The estate tax - known as the “death tax” – will rise from 0% to 55% on January 1, 2011. The tax hike will apply to all individuals who die with total assets valued at over $1 million.
The lame duck House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-N.V.) have not put forth any plans to stop the death tax hike this year.
The death tax was completely repealed for 2010, but had been a tax rate of 35% in 2009. The death tax hike is not part of the Bush-era tax cuts, which are set to expire on the same date.
“Death should not be a taxable event. Death should not force the sale of family farms or the dissolution of small businesses,” Rep. Dave Camp (R-Mich.) said to HUMAN EVENTS. When the GOP takes control of the House in January, Camp will be the Chairman of the powerful Ways and Means Committee, which oversees writing the tax code.
After the bipartisan congressional meeting at the White House on Tuesday yesterday, Speaker of the House to-be John Boehner (R-Ohio) announced that Camp will be his designee for meetings between Congress and the Obama administration to negotiate the tax hikes.
In the House, the Republicans want to permanently eliminate the death tax, and include this provision with the extension of the Bush-era tax cuts that will be voted on in the lame-duck session of Congress this month.
In the Senate, Minority Leader Mitch McConnell (R-Ky.) introduced a “Tax Hike Prevention Act”, which includes a reform of the death tax. Individuals with assets up to $5 million would not pay any death tax, and those above that amount would have a 35% tax rate. McConnell’s plan is bipartisan and co-sponsored by outgoing Sen. Blanche Lincoln (D-Ark.).
“McConnell’s comprise position on the death tax has the best chance of passage in a Democrat-controlled Senate,” said a Senate leadership aide.
The death tax has a particularly detrimental effect on small businesses and family farms. When assessing the tax bill for an inherited small business or family farm, the assets are included in the value, which have less cash. When the death tax is high, families have been forced to sell their small businesses and family farms to pay the tax bills.
“The death tax is really a triple taxation,” said a Republican staff member for the House Ways and Means Committee. “You are taxed when you are alive on your income. Then the capital gains taxes the dividends on investments. Then you are taxed at your death.”
Call me the Grim Reaper, but you have 31 days left during which you can die for free. After that, the government will take 55% of everything you own.
