Estate Tax Makes a Come Back
President Obama signed into law the new bill that would extend the Bush tax cuts, fund unemployment insurance for another 13 weeks and puts a limit on estate tax. Many people are discouraged by the estate tax provision stating that it will reduce the amount of income the government generates in taxes by $20 billion over 10 years. Those in favor of the new estate taxes have commented that leaving more money in the people’s hands that earned it is better for the economy.
However, the new 35% tax rate on estates over 5 million dollars is only in effect for the next two years. After that, depending on who controls the White House and Congress, the rate could disappear altogether or increase to the 55% range at estates valued at 1 million or more like the Democrats wanted to happen this cycle.
The only people that are currently benefiting from the fluctuations in this law right now are financial planners. CPA’s are being hired at an astonishing rate all around the country as financial firms are seeing an influx of concerned citizens wanting to know how to protect their earnings.
These same financial companies have stated that there is no feasible answer right now though, because this moratorium is only for two years. After this period has expired people may need to scramble once again to protect their assets from the government.
Many people believe that the inheritance tax cut was a way to reward the wealthy. However, it is more of a way to keep money in the public sector. Only citizens can stimulate the faltering economy, not the government. By keeping more money in the private sector more people will be willing to spend that same money helping to boost the economy.
Estate tax will always be a source of confrontation in the government and in the private sector. This tax should be watched carefully in the next few years because the possibility of reclassifying “wealthy” to a much lower level is possible, leaving people who thought themselves middle-class no facing the possibility of paying out most of their life’s earnings to the government.
