Wednesday, March 24, 2010

A way out of the estate tax repeal mess

Businessweek reports that the House Ways and Means Committee will start next month the process of extending former President George W. Bush’s tax cuts that benefit American families earning under $250,000 annually, Representative Sander Levin said.

Levin, a Michigan Democrat who is acting chairman of the tax-writing House panel, told reporters today the committee would let lapse lower tax rates for high-earners.

“We’re ready to fight over the issue of extending the middle-class tax cuts and not continuing those for very wealthy families,” said Levin. He said he hopes the committee can begin deliberations on the matter when Congress returns the week of April 5 from a spring break.

Levin also said the committee would begin work to retroactively reinstate a federal tax on multimillion-dollar estates that expired Dec. 31. The legislation would likely seek an extension of a 2009 law, which applied a 45 percent tax rate on the value of estates that exceeded $3.5 million per individual.

"The sooner we do it, the better,” Levin said. The lapse of the levy and a complicated capital gains tax that replaced it was making it hard for families to plan their affairs, he said.

One possibility being considered, he said, would let heirs choose to pay the capital gains tax that replaced the estate levy if that is more beneficial. “We have to write it so we don’t disrupt estate planning in this country,” he said.

The estate tax was replaced Jan. 1 with a capital gains tax that requires heirs pay rates of between 15 percent and 28 percent on any bequeathed assets they sell.

Estate planners say the tax is complicated because it applies to all profit since the assets were acquired by their original owners.