Ag Policy Blog
President Obama Recreates Estate Tax Uncertainty
Certainty is a word thrown around a lot when it comes to tax policy. People and small businesses need certainty. President Barack Obama touted the importance of that certainty when he advocated for passage of the American Taxpayer Relief Act of 2012.
As President Obama said in a statement on the White House web site leading up to the final passage, "What we should do right now is give middle-class families and small business owners a guarantee that their taxes will not go up next year," he said. "When families have the security of knowing that their taxes won’t go up they’re more likely to spend, and more likely to grow the economy. When small business owners have certainty on taxes and can plan ahead they’re more likely to hire and create new jobs. And that benefits all of us."
So right off the bat, DTN Executive Editor Marcia Taylor had to be wrong when she told me that she had seen that the Obama administration had proposed increasing estate taxes again. No, Marcia. You must have gotten that wrong.
You see, because Marcia knows the estate tax has been an unwieldy beast of business uncertainty for American farmers and ranchers for more than a decade. The exemption was broadened in fairly big increments, which was good, then it was completely eliminated for a year, allowing some famous billionaires to pass off their estate untaxed. Then the exemption came back at a more sensible level, but was only being extended a year or two while land prices shot up.
One hundred days ago, President Obama and Congress seemingly put to rest this volatility in the cost of death. The tax law created a permanent estate tax with a 40% tax rate on estates after $5 million is exempted. The exemption is indexed for inflation, so it is $5.25 million this year. This was made permanent, 100 days ago.
That permanency gives everyone, family business, farm and individual alike, certainty of what the tax ground rules are moving ahead. Most farm groups would have preferred a bigger exemption and lower rate. Most Republicans didn't like it because they want to eliminate it altogether. At least some Democrats thought the exemption was too high and helped the wealthy. But after a decade, they reached agreement on a number that would pass.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
So there was just no way Marcia could be right about this.
Marcia was right.
There it is in President Obama's 2014 budget. It's on Page 197, "Modify Estate and Gift Tax Provisions," leading to "Restore the estate, gift and GST tax parameters in effect in 2009." The president would get rid of the permanent law after five years. In its place, the estates would peel back to the $3.5 million exemption and 45% tax rate that was in place in 2009. This would take place in 2018, two years after the president's term ends.
The president's proposal would generate $71.7 billion in savings from 2018-2023. That's $71.7 billion in tax savings the next administration and a future Congress would have to pass, I suspect.
It's an illogical attempt at savings that adds to distrust of the administration by small businesses, farmers and ranchers. What could the conversations have been at the White House Office of Management and Budget, or the White House itself, to insert that proposal? An agreement was just reached on estate taxes and the administration comes out with a proposal to basically scrap the long-term legislation that was just signed.
If the administration felt there was a necessity find another $72 billion in tax revenue over 10 years, it seems there could have been a lot of other options.
What this does is create a lot of uncertainty.
Like the vast majority of Americans, I don't have a personal dog in the estate-tax fight. My dream conversation later life would be a tax attorney advising me that, if I don't change my will, my kids would pay an estate tax. Assuming, of course, estate taxes don't move into the realm of draconian.
Source of President's quote: http://www.whitehouse.gov/…
President Obama's tax proposals: http://www.whitehouse.gov/…
I can be found on Twitter @ChrisClaytonDTN
© Copyright 2013 DTN/The Progressive Farmer. All rights reserved.
Comments
To comment, please Log In or Join our Community .