Sessions' bill would end estate tax
This should help the family farm stay around.
By Alexis Grant
Gannett News Service
SESSIONS
WASHINGTON -- Sen. Jeff Sessions, calling the federal tax on inheritances "Draconian" and "simply unfair," introduced legislation Tuesday that would immediately repeal the tax.
"The death tax falls on small and medium-sized companies particularly hard," the Republican senator said. "We need to fight to bring this up for a vote."
The estate tax, paid by the estates of the richest 2 percent of Americans after they die, generated about $24 billion for the federal government last year, according to the Internal Revenue Service. The estates of about 73,000 deceased Americans paid the bill.
Under a 2001 law, the tax is being gradually phased out until 2010, when it will cease to exist for one year. It will return in 2011 unless Congress passes a law to abolish it permanently.
The House has passed legislation to permanently repeal the estate tax starting in 2010. Sen. Jon Kyl, R-Ariz., introduced an equivalent bill in the Senate in February.
Under Sessions' bill, the tax would be abolished now. Sessions said the tax hurts family businesses and encourages dishonest tax practices,
Gary Palmer, president of the Alabama Policy Institute, a conservative think tank, said the tax punishes people for being successful.
"It's a huge impediment to the economy in terms of the expanse of small business," Palmer said. "There are people out there right now that aren't going to live until 2010. Why wait?"
Under the law passed in 2001, the amount of an estate that is exempt from the tax increases each year while the tax rate decreases.
This year, estates worth up to $1.5 million are exempt, and the tax rate is 47 percent. By 2009, estates worth up to $3.5 million will be exempt and the tax rate will have fallen to 45 percent.
But in 2011, after the tax disappears for a year, estates worth more than $1 million will be subject to the tax and the rate will be 55 percent.
Some say the tax, which was created in 1916 to prevent wealth from accumulating in the hands of a few Americans, should be reformed, not repealed.
Joel Friedman, a senior fellow at the left-leaning Center on Budget and Policy Priorities, advocates keeping the tax but making estates worth up to $3.5 million exempt.
"It's a progressive tax and it encourages a lot of charitable contributions," Friedman said.
And he said eliminating the tax would create "a hole in the budget that has to be plugged someplace," likely by middle- and lower-income Americans.
The Joint Committee on Taxation estimated that continuing to phase out the estate tax and abolishing it in 2010, would cost the government $290 billion over the next 10 years.
But supporters of proposals to eliminate the tax say abolishing it would generate more revenue than the estate tax generates now, as long as heirs are required to pay capital gains taxes on any portion of an inheritance they sell. That provision is included in the bills introduced by Sessions and Kyl.
The capital gains taxes would be based on the appreciation in the estate's value over all the years it existed. Currently, heirs who sell part of an inheritance to pay the estate tax do not have to pay capital gains taxes on the rest of the estate.
A study by CONSAD Research Corporation in Pittsburgh says the change would bring in $38 billion more over 10 years than the estate tax will earn.
The study was sponsored by the American Family Business Institute. Executive Director Dick Patten says the group exists solely to kill the estate tax.
"This tax pulls the capital out of family businesses," Patten said, adding that small businesses often face debt or have to sell after a death. "It's like we have to buy our business back from the government."
This should help the family farm stay around.
By Alexis Grant
Gannett News Service
SESSIONS
WASHINGTON -- Sen. Jeff Sessions, calling the federal tax on inheritances "Draconian" and "simply unfair," introduced legislation Tuesday that would immediately repeal the tax.
"The death tax falls on small and medium-sized companies particularly hard," the Republican senator said. "We need to fight to bring this up for a vote."
The estate tax, paid by the estates of the richest 2 percent of Americans after they die, generated about $24 billion for the federal government last year, according to the Internal Revenue Service. The estates of about 73,000 deceased Americans paid the bill.
Under a 2001 law, the tax is being gradually phased out until 2010, when it will cease to exist for one year. It will return in 2011 unless Congress passes a law to abolish it permanently.
The House has passed legislation to permanently repeal the estate tax starting in 2010. Sen. Jon Kyl, R-Ariz., introduced an equivalent bill in the Senate in February.
Under Sessions' bill, the tax would be abolished now. Sessions said the tax hurts family businesses and encourages dishonest tax practices,
Gary Palmer, president of the Alabama Policy Institute, a conservative think tank, said the tax punishes people for being successful.
"It's a huge impediment to the economy in terms of the expanse of small business," Palmer said. "There are people out there right now that aren't going to live until 2010. Why wait?"
Under the law passed in 2001, the amount of an estate that is exempt from the tax increases each year while the tax rate decreases.
This year, estates worth up to $1.5 million are exempt, and the tax rate is 47 percent. By 2009, estates worth up to $3.5 million will be exempt and the tax rate will have fallen to 45 percent.
But in 2011, after the tax disappears for a year, estates worth more than $1 million will be subject to the tax and the rate will be 55 percent.
Some say the tax, which was created in 1916 to prevent wealth from accumulating in the hands of a few Americans, should be reformed, not repealed.
Joel Friedman, a senior fellow at the left-leaning Center on Budget and Policy Priorities, advocates keeping the tax but making estates worth up to $3.5 million exempt.
"It's a progressive tax and it encourages a lot of charitable contributions," Friedman said.
And he said eliminating the tax would create "a hole in the budget that has to be plugged someplace," likely by middle- and lower-income Americans.
The Joint Committee on Taxation estimated that continuing to phase out the estate tax and abolishing it in 2010, would cost the government $290 billion over the next 10 years.
But supporters of proposals to eliminate the tax say abolishing it would generate more revenue than the estate tax generates now, as long as heirs are required to pay capital gains taxes on any portion of an inheritance they sell. That provision is included in the bills introduced by Sessions and Kyl.
The capital gains taxes would be based on the appreciation in the estate's value over all the years it existed. Currently, heirs who sell part of an inheritance to pay the estate tax do not have to pay capital gains taxes on the rest of the estate.
A study by CONSAD Research Corporation in Pittsburgh says the change would bring in $38 billion more over 10 years than the estate tax will earn.
The study was sponsored by the American Family Business Institute. Executive Director Dick Patten says the group exists solely to kill the estate tax.
"This tax pulls the capital out of family businesses," Patten said, adding that small businesses often face debt or have to sell after a death. "It's like we have to buy our business back from the government."
