Estate Tax Fix In The Works?
From Tax News comes the following hopeful repor that Congress may in fact do something sometime soon about the uncertain status of the federal estate tax. I will refrain from commenting on Warren Buffet's remarks here (but may well do so in a future post) - let us at least hope that Congress does SOMETHING soon to bring at least a little certainty and predictability to the tax considerations that go into estate planning. Here's the gbit from Tax News:
At a November 14 Senate Finance Committee hearing, Republicans and Democrats, in rare agreement, said that the current estate tax situation is a quagmire and needs to be fixed. The only question is how. With total repeal out of the question, Committee Chairman Max Baucus, D-Mont., put the question to his committee and a panel of tax experts, including two family business owners whose heirs could be forced to choose between selling the family business or going deep into debt in order to settle with the IRS.
Lawmakers and panelists also agreed that, in addition to the costs, the uncertainty associated with the future of the tax creates havoc with estate planning, as small business owners find themselves constantly adjusting their wills to accommodate new family members and shifting tax rates included in the Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16). "Complicated trusts often have to be created to deal with the moving target estate tax exemption," testified attorney and law professor Conrad Teitell. "And we have to draft for the contingency that there won't be an estate tax in 2010," he said. "Families must have multiple estate plans," agreed Baucus. "And that costs money."
Teitell, who has published a number of articles on the topic of taxes, wills and estate planning, noted that life insurance planning to pay for estate taxes and provide liquidity is also difficult. Indeed, constant estate planning has become a necessity in these uncertain times, according to Teitell. "Putting off decisions until Congress acts can be hazardous to your wealth," he quipped.
With panelists and lawmakers basically on the same page, the focus of the hearing quickly moved to where to draw the line - how big of an estate should trigger the tax. While many felt full repeal was justified, a straw poll appeared to settle on a figure of around $4 million, indexed for inflation. For his part, Baucus said that current congressional dynamics are such that he must wait until 2008 to begin looking at adjustments to the estate tax, but he told reporters following the hearing that major changes would come either in 2009 or 2010.
While the hearing was ostensibly dedicated to exploring the problems associated with the current estate tax laws, the star power of one panelist, business magnate and philanthropist Warren Buffet, proved too tempting for some lawmakers to ignore. Ranking member Charles E. Grassley, R-Iowa, asked Buffet to digress from the estate tax topic and give his opinion on taxing carried interest, an issue that Grassley admitted he remained undecided on. Buffet acquiesced, telling Grassley that he once served as a hedge fund manager and that he regarded it an occupation like any other and should, therefore, be taxed as such.
Grassley then turned to the question of tax-exempt charities and college endowments, asking Buffet whether he thought the current laws on charitable spending requirements should be changed. Buffet again acquiesced, telling the senior lawmaker that charities and endowments were no different than private businesses when it came to federal requirements and that they would use their funds as they saw fit. "It's institutional economics", said Buffet. "Require them to spend 3 percent of their donations on charitable purposes and that's what they will spend. Require 5 percent and they'll spend that." Flat-tax advocate Ron Wyden, D-Ore., inquired of Buffet his views on the subject. "I'm with you in principle," responded Buffet."But, it should be progressive."
By Jeff Carlson, CCH News Staff.
Source: Tax News
