It’s 2010 at last, and that means that the long-anticipated federal estate tax repeal is upon us. You read it right: if you die in 2010, your estate will not be taxed.
How long has the repeal been anticipated? The 2001 Tax Act provided estate tax legislation for the years 2002–2009, followed by a year without. In 2011, the estate tax is to return with the same exemption and rate that it held in 2001, a higher rate than during the span 2002–2009.
A year free of estate tax is not to everyone’s liking, however: the House of Representatives voted 225-200 (a 52.9% majority) in favor of extending the estate tax policy of 2009 into 2010. The House’s decision was not reached until last month, however, and the Senate adjourned without ever addressing the bill, so the action was never carried.
Picking up where the Senate dropped the ball is President Barack Obama, calling again for an extension of the 2009 estate tax into 2010. Some invigilators (including moneywatch.com and Mayer Brown) address the likelihood that our federal overseers will install the 2010 estate tax and furthermore make it retroactive to 1 January, which will surely prove an irritatant to those who suffer bereavements in the interim—not to mention violate the ex post facto prohibition of the U.S. Constitution, Article 1 §9. (After all, the constitutional prohibition has not always prevented ex post facto legislation in the past. Wikipedia points to the Adam Walsh Child Protection and Safety Act of 2006 for an example.)
Is it likely that the estate tax will be back later this year? With both the House and the President behind it, it ought to be. With an ever-accelerating federal deficit, our administrators are hardly to be expected to pass up on the $25 billion per year that estate tax brings in. Moreover, the estate tax falls well with the current administration’s affinity for taking from the unpopular rich in order to win voter support from the majority (consider the 90% bonus tax bill passed by the House last year for another example).
In 2009, the estate tax exemption stood at $3.5 million, with a tax rate of 45% for every cent after that.
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