The news is full of statements of how the Republicans were taken by the President. If they regret there were no big budget cuts, I can understand, but the tax situation seemed to fulfill all they wanted. The $5 million estate tax was retained (but at 40% rather than 35% for excess over that) when the president wanted $3.5 million and 35%. Everyone gets a tax cut on the first $400,000 ($450,000 for couples) of income with the wealthiest paying what they did in the nifty nineties at 39.6%. Except for the wealthiest 1% of Americans, the Bush tax cuts were made permanent. I thought the Republicans were angling to make the Bush tax cuts permanent for this for years. Because Obama campaigned on making the level $200,000 (and $250,00 for couples), it would seem he lost this battle and Republicans won.
Individual tax extenders for individuals, business, and energy also add to the deficit. This may be a draw as I believe both sides wanted at least parts of this. Republicans may not have wanted to extend the unemployment insurance so count this as an Obama win. The "doc fix" also was included and costs an amazing $25 billion over the 10 years. I think this was also a draw.
Were Republicans really against restoring the 2% cut in payroll tax? I would count this as a Republican win though there is a tendency to call it a tax increase. Is no temporary tax cut temporary? I thought Republicans feel that Social Security is in trouble. Oh, they want to do away with it entirely and make it a 401-k. Still I think Republicans won this.
Now there is a lot of brave talk about how much making the Bush tax cuts permanent will contribute to the deficit, but it turns out that all depends on how you start. If you assume that the Bush tax cuts would be fully suspended, there would be close to $4 trillion added to the deficit, but if you count where the budget was in 2012, there is actually a decrease in the deficit by, I think, something like $760 billion.
Unfortunately the Sequester was kicked down the road, but it seems to me that both sides don't like it. The Republicans don't like the cut in defense and the Democrats don't like the cuts in non-defense. The Republicans can never seem to spend too much on defense, even though we spend more than the next 10 largest defense spending countries combined. So both sides have oxen that they don't want gored. That is why we have a deficit problem.
Over all, it seems to me that the Republicans won on the tax compromises. They just never seem satisfied.
I don't see much happening to Medicare unless both sides agree to jump off a cliff together. After all, Obama has paid politically for every modification he has proposed as things as "Death Panels" and "Rationing." There is a lot of rationing in Medicare today. For example, I recently found that Medicare does not cover shots for shingles. As I know of five people who have had it (one losing and eye and another taking large doses of pain killers for a year), including my wife, I got it and paid the $225 myself.
Some figures in this post are from http://www.outsidethebeltway.com/congress-jumps-off-fiscal-cliff-pulls-parachute-rip-cord/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OTB+(Outside+The+Beltway+%7C+OTB)
Showing posts with label estate tax. Show all posts
Showing posts with label estate tax. Show all posts
Friday, January 4, 2013
Tuesday, December 11, 2012
INHERITANCE TAXES
An informative article on what might be in store for estate/inheritance/gift taxes is given at: https://www.cnbc.com/id/100296248
For the rest of this year, the estate/inheritance tax applies only to estates valued over $5 million and the tax rate on these is 35%; however, if we go over the fiscal cliff, the inheratance tax will apply to estates worth more than to $1 million and be taxed at 55%.
Republicans have been saying that the the tax, they call the "death tax," hurts farmers and small business men. Some Republicans would prefer to have no estate tax, as it was in 2010, but others will agree to leaving the estate tax what if is in 2012. In contrast President Obama proposes a exclusion of the first $3.5 million with a tax rate of 35% on those estate exceeding the exclusion sum. The estate tax raised $10.6 billion in 2012, according to the Tax Policy Center. At the 2012 rates, they estimate that the estate tax would raise a total of $161 billion by 2021, a 10 year interval. If the estate tax reverts to the old level, the estimate is a raise of $531 billion. Obama's plan is estimated to raise a total of $258 billion by 2021.
As to the estate tax hurting farmers, the Tax Policy Center says that fewer than 50 out of the 3,270 paying estate taxes were small farmers and small buinesses, and they paid less than 1% of the total taxes. "The top one percent of earners, by contrast, paid nearly 80 percent of the estate tax last year. The top 0.1 percent paid nearly half."
The goal is to reduce the Federal budget by $4 trillion by 2021 so letting the estate tax revert to $1 million would raise more than 10% of the total by itself. We are fooling ourselves if we think that lowering the Federal budget by $4 trillion can be done without pain on inheritance. So reluctantly, I would prefer to let the estate tax revert to the old level. It would not affect the poor and probably most of the middle class.
Note: After writing the above, I found a group of super wealthy people, including Warren Buffet and Bill Gates, who propose a $4 million exemption with a graduated tax rate starting at 45% for fortunes greater than the exemption:
https://www.cnbc.com/id/100301732
For the rest of this year, the estate/inheritance tax applies only to estates valued over $5 million and the tax rate on these is 35%; however, if we go over the fiscal cliff, the inheratance tax will apply to estates worth more than to $1 million and be taxed at 55%.
Republicans have been saying that the the tax, they call the "death tax," hurts farmers and small business men. Some Republicans would prefer to have no estate tax, as it was in 2010, but others will agree to leaving the estate tax what if is in 2012. In contrast President Obama proposes a exclusion of the first $3.5 million with a tax rate of 35% on those estate exceeding the exclusion sum. The estate tax raised $10.6 billion in 2012, according to the Tax Policy Center. At the 2012 rates, they estimate that the estate tax would raise a total of $161 billion by 2021, a 10 year interval. If the estate tax reverts to the old level, the estimate is a raise of $531 billion. Obama's plan is estimated to raise a total of $258 billion by 2021.
As to the estate tax hurting farmers, the Tax Policy Center says that fewer than 50 out of the 3,270 paying estate taxes were small farmers and small buinesses, and they paid less than 1% of the total taxes. "The top one percent of earners, by contrast, paid nearly 80 percent of the estate tax last year. The top 0.1 percent paid nearly half."
The goal is to reduce the Federal budget by $4 trillion by 2021 so letting the estate tax revert to $1 million would raise more than 10% of the total by itself. We are fooling ourselves if we think that lowering the Federal budget by $4 trillion can be done without pain on inheritance. So reluctantly, I would prefer to let the estate tax revert to the old level. It would not affect the poor and probably most of the middle class.
Note: After writing the above, I found a group of super wealthy people, including Warren Buffet and Bill Gates, who propose a $4 million exemption with a graduated tax rate starting at 45% for fortunes greater than the exemption:
https://www.cnbc.com/id/100301732
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