Let’s do a little conventional political
Business organizations generally support issues championed by Republicans.
Republicans generally oppose the federal estate tax, or as they tend to call it, the “death tax.”
So that 1 + 1 should = business groups also would like to see the total elimination of the estate tax.
Wrong.
Forty-six business groups, including big business dogs such as the National Federation of Independent Businesses, the American Farm Bureau Federation, the National Association of Manufacturers and the U.S. Chamber of Commerce, have told Congress they want a permanent 35 percent tax on estates worth more than $10 million.
Current tax law calls for taxation of estates worth more than
The change of heart marks the end of the business lobby’s perennial effort to end the tax. As recently as January, the Chamber’s executive vice president had argued for sending “the death tax to the grave once and for all.”
However, it seems that the proverbial advice “be careful what you wish for” has come into play.
Apparently, the prospect of seeing a tougher estate tax reinstated after a one-year reprieve has prompted the businesses to rethink their position.
Basis considerations: Doing away with the estate tax even for just one year also poses all sorts of problems for some families.
Many heirs will lose the ability to take advantage of stepped-up basis. This is the tax code provision that allows you to count the value or an inherited asset as its fair market value at the time the person who originally owned it died.
Very simply put, a property worth $100,000 when Mom bought it but worth $1 million when she died would have a stepped-up basis of $1 million for you, the inheritor.
The end of the estate tax calls for carry-over basis; that is, in addition to getting the property, you’d get Mom’s basis in it, too.
There are some exceptions to the carry-over basis rule, but in many cases, people would do a lot better under the current rules, that impose a tax on estates worth more than $3.5 million but who get the stepped-up basis on those assets.
Money, money, money: There’s also the matter of money. Our federal bank account’s money.
Even Republicans are now supporting a permanent estate tax with a generous exemption amount and lower-than-55-percent rate. Part of the reason, aside from the ones mentioned above, is the federal deficit.
While estate taxes only affect a very small group of taxpayers, around 2 percent or less is the usual estimate, when the Treasury is bleeding red ink, the chance to get even a comparatively small amount of revenue is political catnip.
You can read more about the businesses switcheroo on estate taxes in the Houston Chronicle (Bloomberg) and Wall Street Journal (Dow Jones Newswires).
And be sure to check out my earlier posts on the estate tax:
