Re: tax cut passes Congress (U.S.)

[Marta Russell <ap888@xxxxxxxx>]

This is one of the more confusing issues.  Gary Bass of OMB Watch says:
I have great news.

Our combined efforts helped to stop repeal of the estate tax.

Because House-Senate conferees were limited to a $1.35 trillion tax
cut, they could not make repeal of the estate happen right away.  In
fact, the best they could do is to start repeal in 2010. For every
month they tried to move up the timetable, it meant a considerable
hike in the cost of repeal, thereby crowding out other tax cut
priorities.  For example, the year full repeal is in place, 2011,
costs $53.4 billion; whereas the cost in 2009, before repeal starts,
is only $12.7 billion. (See chart below on costs.)  As a result, they
left the repeal date as 2010.

Now the really good news.  Although the Senate is still debating the
final product, the tax bill that is likely to be passed by Congress
expires in 10 years at midnight on December 31, 2010.  On January 1,
2011 all the provisions in the bill sunset and revert to current law.
Thus, the estate tax repeal will last for only one year!

At best this is a rhetorical victory for those opposed to the estate
tax.  (I'm sure there will be many jokes about various life support
systems keeping people alive for certain periods of time.)

You can bet that they will be back at it to make repeal permanent.
They had a free ride for years misleading the public with their "death
tax" message. But this time, as a nonprofit community, we will be
ready.  We will not let that continue.  We will be in for the long
haul now.

Despite a horrendous overall tax bill, you should feel proud that your
voice was heard and that we made a difference on the estate tax.  Just
a short time ago, everyone thought estate tax repeal was going to
occur.  It was a high priority for conservatives.  They had money,
clout, and momentum.  It was supposed to be a slam dunk.

But it didn't happend.  As a coalition of nonprofits, joined by Bill
Gates, Sr. and other members of the Responsible Wealth project, we
were able to speak about the impact repeal of the estate tax would
have on charities, on giving, on programs, and on wealth distribution.
And we stopped them.  WOW!

Enclosed is a press release that OMB Watch released on behalf of the
Nonprofits to Preserve the Estate Tax.  And below find the main
elements of the estate tax changes in the conference agreement.

Congratulations all.  And thanks for you EXCELLENT work!

MAIN ELEMENTS OF ESTATE TAX REFORM

1.  The tax rate drops from 55% to 45% by 2007.  The chart below
provides the details.

2.  The wealth exemption (under the unified credit) goes up $675,000
to $1 million next year.  It rises to $3.5 million by 2009.  (These
figures are double for couples.)  The chart below provides the details.

3.  In 2004, the family-owned business deduction is repealed.

4.  The state tax credit phases out by 2005.  Next year it is reduced
by 25%, in 2003 by 50%, in 2004 by 75%, and repealed in 2005.  A
deduction will be permitted under certain circumstances after that.
This could have a large impact on state revenues.

5.  The estate and generation-skipping transfer tax is repealed in 2010.

6.  After repeal, a modified carryover basis for property acquired
from a decedent is used. The final tax bill needs to be reviewed for
details since there are complex procedures.

7.  The gift tax is retained and the top tax rate will be the top
individual income tax rate.

8.  All of this expires on January 1, 2011 reverting to current law.

                WEALTH             HIGHEST
YEAR          EXEMPTION           TAX RATES
--------     ----------------     ------------
2002         $1 million             50%
2003         $1 million             49%
2004         $1.5 million           48%
2005         $1.5 million           47%
2006         $2 million             46%
2007         $2 million             45%
2008         $2 million             45%
2009         $3.5 million           45%
2010         NA (Repealed)          Top individual rate
                                    (Gift tax only)

COST OF ESTATE TAX CHANGES

2002         105


--
Gary D. Bass
OMB Watch
1742 Connecticut Ave., N.W.
Washington, D.C.  20009
TEL: (202) 234-8494   FAX: (202) 234-8584
email:  bassg@xxxxxxxxxxxx
url:  http://www.ombwatch.org
--

Andrew Hagen wrote:
>
> Both houses of Congress have now passed the Conference Committe tax cut
> bill. The only step left is the signature of the president. Several
> adjustments will be made in tax rates.
>