Blogs Derek's Tax Blog 2010 Buzz: Retroactive Extension
Will congress act to restore the estate tax for next year? If Representative Hoyer and Senator Baucus have their way, the answer is yes.
"I have every confidence it will be fixed early next year," said Rep. Earl Pomeroy.
Really. Where does this confidence come from? This one year repeal has been part of the law for the past 8 1/2 years. Congress has talked about it every year since then. President Obama made a campaign promise to deal with it. A fix made it into the 2009 budget resolution. The House passed a permanent extension earlier this month. But still the law hasn't changed.
"It is an outrage," Senator Max Baucus said, "that the Congress allows estate taxes to change so much."
True. But that statement makes it sound like someone else is responsibility. Senator Baucus chairs the tax-writing Senate Finance Committee. He is leader in the Democratic Party. Even though his party controls the Senate with the needed 60 vote majority. They have wasted away this year without resolving this matter. There aren't many with more responsibility for this result than Senator Baucus.
The truth is that neither of them can feel confident that they can pass a retroactive extension. There best opportunity to do so was this year. There really is no reason why the Senate would take up an estate tax bill early in the year. The health care bill still needs to be completed, the House is sending them more pressing matters, and many of the extenders, including the debt ceiling, will need action within the first two months. That means they are unlikely to address this issue until after President Obama releases his 2010 budget. A budget that will necessarily take a tighter line on deficits. I assume that means tax increases, but it could mean spending cuts.
Once the Senate does take up the estate tax, they will face a more difficult time passing a bill then they did this year. The 2010 repeal will get a lot of press over the next few months. The Senate will not be able to slip a measure in somewhere without public debate. That debate will occur during an election year. The Republicans will be resolved to resist an estate tax bill after having "won" this round. Meanwhile, Democrats on one end of the spectrum will be unwilling to vote for a tax cut (2011 and beyond) when facing budget cuts or middle class tax increases to reduce the deficit. Democrats on the other end of the spectrum will be looking for larger exemptions then the center of the party is willing to go for.
Who is going to prevail in this battle? I don't know, but don't pay attention to any of the pundits. They all thought the repeal wouldn't happen. For all I know I could be writing an entry this time next year discussing the possibility of a 2011 estate tax bill that would raise the $1 million exemption.
[If you are not up on the latest on this issue, the short story is that now that the house has passed the defense bill with its host of extenders excluding one for the estate tax, the federal estate tax will be repealed next year just as the law was written in 2001, (barring the house coming back into session for a New Years Eve vote).]