Just a few months ago, President Obama and Republican lawmakers on Capitol Hill negotiated their way off the fiscal cliff and agreed to make the estate tax a mere shadow of its former self – so much so, according to estimates from the Tax Policy Center, that only 3,800 estates will owe any federal estate tax in 2013.
President Obama’s new budget proposal, however, aims to turn things back around.
It would raise the estate tax rate to 45 percent from 40 percent in 2018. And it would lower the per-person estate tax exemption from $5.25 million to $3.5 million.
The White House says that only three people out of every 1,000 would be affected by the change.
But a Wall Street Journal editorial points out that the $3.5 million exemption in Obama’s budget isn’t indexed for inflation:
“This means that over time much smaller estates would be hit with a rate that would confiscate nearly half of a lifetime of savings or business success. That’s exactly how a death tax that was originally sold in 1916 as hitting only billionaires like the Rockefellers gradually began to apply to middle-class families who own, say, a successful auto-repair shop or invested wisely during the stock market booms of the 1980s and 1990s.”
The Journal says Republicans are unlikely to go along with the idea.
You can’t take it with you, as the saying goes, but – at least for the time being – you can leave it to your heirs.
Also of Interest
- What’s the Reaction to Obama’s Social Security Proposal
- 9 Things to Look for in the President’s Budget
- Join AARP: Savings, resources and news for your well-being
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