Blogs Derek's Tax Blog Another Estate Tax Increase
President Obama is schedule to announce new tax increases today that will raise $60 Billion over the next 10 years. Although details are limited at this time, the Reuters article and the Wall Street Journal article make it clear that Obama is taping the estate tax as a way to pay for his health care initiative. The estate tax hike is described in the articles as closing “loop holes”. It appears the “loop hole” in question is valuation discounts. The fact that valuation discounts may be the target is not a surprise, as this technique was often a target of the Clinton administration.
However, the ink is barely dry on the budget resolution, where we saw President Obama’s first estate tax increase, and another estate tax increase is proposed. This blows my theory that we wouldn’t see additional estate tax increase proposed by the President until next year, when the President and congress will be anxious to get as much of their spending and taxing initiatives in place before the mid-term election.
By introducing this increase now and tying it to health care, President Obama is signaling to congressional leaders that he is encouraging a debate on spending priorities and taxation when congress is working on the budget bills later this year. He is also highlighting the estate tax in such a way that we will begin to see more editorials, studies, and special interest groups weighing in.
Clearly, the battle over the estate tax is not over.
UPDATE: CNN offers this analysis of the “loop hole”. As described in the article, this would actually be an income tax increase since it would require tax payers to use a lower basis would determining their capital gains at a subsequent sale. More over, it is not likely to raise much estate tax revenue since most people would prefer a lower deferred capital gains rate to the higher immediate estate tax.