Estate Tax Legislation Update
Body We have not seem an actual proposed bill containing the Bush legislation and we have looked. Senators Graham and Miller introduced S 35, before President Bush sent his proposal to Congress, which was reported to be the Bush bill at the time. S 35 does not repeal the stepup in basis. See the article below this one for a review of S 35.It is reported that the Bush Plan repeals the federal estate tax over an eight-year period. Estate tax rates would be reduced by 5% in 2002; 10% in 2004; 15% in 2005; 20% in 2006; 30% in 2007; and 40% in 2008. The tax would be eliminated completely in 2009.
S 35 retains the current "coupon amounts" and I have not seen anything which indicates the Bush plan does differently.
In connection with the repeal of the estate tax, one needs to remember at least two things:
- Any Senator can filibuster the estate tax bill. I see Senator Kennedy as a possible candidate to filibuster. The Republican's do not have enough votes to break a filibuster. Several Democrats would have to vote to end the filibuster.
- The Byrd amendment is a Sunset provision which provides that unless legislation is passed by a super majority, it ends in about the tenth year. The bill which ended the estate tax sent to President Clinton in 2000, would have eliminated the estate tax as of January 1, 2009 and then reinstated it full blown, just as it is now, on October 1, 2009. The tax was only eliminated in that bill for 10 months. At the end of that ten month period, the estate tax would have regressed back to the present tax.
We do not see S 35 nor the Bush plan addressing the Generation Skipping Tax. THe Generation Skipping Tax is a 55% tax, which is in addition to the Estate Tax, on transfers over One Million Dollars to persons more than one generation below the person making the transfer.
In connection with income tax, the Bush plan does not address the Alternative Minimum Tax. With the changes in income tax, more people will be subject to the Alternative minimum tax. Unless addressed in the legislative process, the tax breaks for those in higher brackets will not be as generous as some are suggesting.
2/12/2001
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