Wednesday, June 21, 2006

Estate tax vote looming

The estate tax will go up for a vote in the House this week, but full repeal isn't on the table.

Here's the compromise:

Estates worth as much as $5 million -- $10 million for couples -- would be exempt from taxation indefinitely.

The tax rate on estates worth more than the exemption level up to $25 million would be set at the same tax rates that apply to capital gains -- now 15 percent but scheduled to rise to 20 percent in 2011. The rate for estates worth more than $25 million would be twice the capital gains rate.

Here's what I don't like about the bill:

The bipartisan Joint Committee on Taxation estimated the estate tax cut would cost the government $279 billion over 10 years.

And with no "pay as you go" provision, guess where that money will come from? If you answered "piled on top of the already big deficit", you'd be right. It's better than the $1 trillion cost of a full repeal, but it's still too much money.

As I've written before, "fixing" the estate tax just makes it that much harder to address more-pressing concerns, like the Alternative Minimum Tax or, say, reducing the deficit.

There's also this lovely piece of bribery:

To lure Democratic senators from Washington state and Arkansas, Thomas included a lucrative tax break for the timber industry, pushing the total cost of the bill to nearly $280 billion.

You gotta love it when both sides sell out their principles for a buck.

The good news: Passage isn't certain, and is even less likely in the Senate, which rejected an estate-tax appeal earlier this year.

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