April 03, 2009
House and Senate Differ on Estate-Tax Provisions
By Grant Williams
Washington
The House and Senate have passed budget outlines that differ significantly in how they would apply the estate tax.
The House version follows what President Obama has proposed and umbrella groups of nonprofit organizations have embraced: keeping the estate tax at levels that are already in effect this year. But the Senate version would cut the estate tax, a move that alarms many charitable organizations.
The two houses will work out differences in a conference committee.
In 2001, Congress passed the current law that gradually phases out the estate tax through 2009 and repeals it for 2010. In 2011, however, the current law is set to expire and estate-tax levels that applied years earlier go back into effect unless Congress takes action.
The budget outline just passed by the House would keep the estate tax at 2009 levels (and do away with the 2010 repeal). Heirs could exempt $3.5-million from taxes ($7-million for couples), with amounts above that taxed at 45 percent.
The Senate’s budget outline would raise the exemption for individuals to $5-million ($10-million for couples) and lower the tax rate to 35 percent.
Independent Sector, a coalition of charities and foundations, earlier this week said it supported efforts to permanently keep the estate tax at 2009 levels. Independent Sector urged Senators not to raise the exemption and lower the tax rate from 2009 levels. Doing so would make charitable bequests more expensive and significantly reducing charitable giving, the organization said.
Studies have shown that the estate tax prompts wealthy people to give more money to charity since that shields some assets from taxation.
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I agree that we ought to lock in the 2009 exemption at $3.5 million and keep the rate at 45% above that.
— clinton a. schroeder Apr 3, 03:39 PM #
Acknowledging that taxes have an impact on giving is a far different matter than actively lobbying for maintaining or increasing tax rates for the express purpose of creating an incentive to give, independent of other economic justifications for the tax. The former is pragmatism, the latter thuggery.
— Jeff Steele Apr 3, 05:45 PM #
If we are going to have any estate tax, then the Senate version seems just right. A 35% rate and $5 million exemption will provide more than sufficient incentive for charitable giving.
— JF Apr 6, 01:12 PM #
The senate version with higher exemption and lower tax rate will keep more small and family businesses alive and producing further wealth, a significant portion of which will continue to go towards charitable purposes.
— Stephen Stranahan Apr 6, 03:48 PM #
The Independent Sector’s reason for opposing the Senate version is outrageous. The best way to encourage charity from the wealthy is to continue to allow full deductiblity of their voluntary contributions.
Independent Sector should be ashamed of its position.
— Leonard Kranser Apr 7, 07:06 PM #
I love the “studies haev shown” line near the end of the article. I researched the studies and wrote about them on my web site.
There are two sets of researchers on estate tax, each set with different conclusions. There was a gov’t study that took one set of researchers’ data and mangled it in ways even the researchers objected to. That mangling has become the “government study” that some policy advocates refer to.
See:
http://www.sumptionandwyland.com/nonprofit_Topics/estate_tax_repeal.html
— Michael L. Wyland Apr 8, 12:24 PM #
I wholeheartedly agree that the estate tax rate should be kept at the 2009 levels with a maximum estate tax rate of 45%. To do otherwise would significantly effect philanthropy going forward.
— Gail Cass Apr 14, 08:35 PM #