The federal estate tax appears to have become a sticking point in the fiscal cliff negotiations. While President Obama supports going back to the estate tax laws that were in effect in 2009 ($3.5 million estate tax exemption, $1 million gift tax exemption, 45% estate tax rate), there is a growing divide between Democrats in Congress who support the president and those who have sided with their Republican cohorts and want to extend the current estate tax laws ($5.12 million estate tax and gift tax exemption, 35% estate tax rate). Of course, if a compromise cannot be reached, then on January 1, 2013 the estate tax and gift tax exemptions will drop to $1 million and the estate tax rate will jump to 55%. Couple this with a group of wealthy progressives (including Warren Buffett, Jimmy Carter, Abigail Disney, and Bill Gates Sr.) who on Tuesday presented their "responsible estate tax" proposal - a $2 million estate tax and gift tax exemption and base estate tax rate of 45% that will gradually increase on larger estates - and the only thing that is clear is that the proposals are all over the place.
To sum it all up:
- Obama = $3.5 million estate tax exemption, $1 million gift tax exemption, 45% estate tax rate; the Tax Policy Center projects that this will raise $258 billion by 2021
- Republicans and a handful of Democrats = $5.12 million estate tax exemption, $5.12 gift tax exemption, 35% estate tax rate; the Tax Policy Center projects that this will raise $161 billion by 2021
- Nothing is done = $1 million estate tax exemption, $1 million gift tax exemption, 55% estate tax rate; the Tax Policy Center projects that this will raise $531 billion by 2021
- Wealthy progressives = $2 million estate tax exemption, $2 million gift tax exemption, graduated estate tax rate beginning at 45%; how much this would be projected to raise by 2021 cannot be calculated since the graduated rate schedule was not disclosed
So where does this leave us at the eleventh hour? Fuzzy, very fuzzy.
Sources:
- $3.5 Million Estate Tax Exemption, 45% Estate Tax Rate, and One Big Yawn
- What is the Future of the Federal Estate Tax?
- Next Battle on the 'Cliff's' Edge: Estate Taxes
- Warren Buffett And George Soros Want Higher Estate Tax Than Obama Proposes
- Buffett, Carter, Gates Sr. And Friends Call For Estate Tax With 45% Teaser Rate Amid Fiscal Cliff Negotiations
- Can US Estate Tax Avert The Fiscal Cliff? These Rich Progressives Think So