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Financial Article Summary

Financial Article Summary

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Published by bakerr7734

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Published by: bakerr7734 on Nov 24, 2010
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Rebecca BakerFinancial Article
 Estate Tax Issue Offers Quick Test for Congress
By: Richard H. Thaler  November 6, 2010
The newly elected Republican Congress leaders will soon face important decisionsregarding the estate tax. They have promised to begin progress in a better and more disciplined budget, as well as less economic uncertainty. There are two vital parts to the estate tax regardingfigures, the amount of an estate that is exempt from taxes and the amount paid on estates larger than the exemption.Congress has three options; one is to do nothing and return to the 2001 exemption andrates, which President Bush administered during his term. It is known as the “Economic Growthand Tax Relief Reconciliation Act of 2001, which expires at the end of the fiscal year in 2010.“In 2001, the exemption was $1,350,000 for a married couple, and half that for a single person.The maximum tax rate was 55 percent. Between 2002 and 2009, the exemption for a couple wasgradually raised to $7 million and the maximum rate was lowered to 45 percent. Gifts of any sizefrom one spouse to the other are not taxed, unless the spouses are of the same sex.”The second option would be for Congress to make the 2009 rates and exemption permanent. This is an approach that the Obama and Democratic administration favors, becausethe rates will adjust according to the inflation rate, also know as the consumer price index. Thethird option is to eliminate the estate tax altogether, which the Republican leadership favors.There are many problems that arise with these options, but the worst would be toeliminate the estate tax altogether. There are new requirements for any estate with more than$1.3 million in unrealized capital gains. The I.R.S. wants to know the original price of all theassets, which will be provided on a new form the agency has not yet implanted yet. This is quiteridiculous, considering one’s grandparents, or great grandparents will probably not have their 

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