Obama Estate Tax Proposal Undercut by Division among Democrats
President Barack Obama’s proposal to increase the estate tax on inherited wealth has been undermined by the division among Democrats. If an amendment is not made before the arrival of the fiscal cliff, then the current estate tax rate could be higher than Obama’s proposed rate.
The action on the estate tax could be postponed. President Obama wants wealthy Americans to pay more taxes. They are the ones who pay estate taxes. The result would center on whether the president will insist on increasing individual income tax rates for high income earners or whether he puts the issue off.
The stand-off regarding taxing the wealthy can reach a compromise with the estate tax. The public wants more fairness in taxes. It is different compared to the last time it was debated upon in Congress. The fiscal cliff is a collection of automatic government spending cuts and federal tax increases that will take effect at the start of 2013. If no deal can be made, the US economy could go into recession.
Former Republican President George W. Bush signed the law a decade ago that made the estate tax on inherited assets at 35 percent after a $5 million exemption. A deceased person can pass on an inheritance of up to $5 million before any tax is applied on it. Inherited wealth passed to a spouse or a federally recognized charity is not taxed.
President Obama wants to increase the rate to 45 percent after a $3.5 million exemption. The Bush rates are set to expire on December 31 if Congress doesn’t do anything about it. The rate would become 55 percent after a $1 million exemption, which is the pre-Bush level.
New York Senator Charles Schumer said that Democrats’ proposal to avoid the fiscal cliff involves $1 trillion in deficit reduction including new revenue from increasing estate tax to the level that President Obama wants. But some Democrats want the estate tax rates to remain at their current rates.