There's been a lot of talk in Washington about what should happen to the estate tax. But American Farm Bureau Federation Tax Specialist Pat Wolff says that has not translated into action.
"Everyone here in Washington knows that unless Congress acts the estate tax will come back on Jan. 1 with only a $1 million exemption and a top rate of 55%, that's a tax level we haven't seen in 10 years," Wolff said. "Everybody agrees that something needs to be done before Jan. 1 but the debate is over what should happen, how much estate tax relief should be provided."
Since 2001 the estate tax exemption has been increasing as the rate decreased until it zeroed out at the end of 2009. However Congress didn't finish the job 10 years ago, leaving it to this Congress to keep the tax from reverting to pre-2001 levels.
Wolff says there is nothing certain about what Congress will and won't do. However the House of Representatives have already passed a bill that would set the exemption at $3.5 million with a tax rate of 45%.
"The Senate is where everything is gummed up, but the Senate is also where we think we can do better than the House," Wolff said. "Two very important Senators, John Kyl from Arizona and Blanche Lincoln from Arkansas, have agreed and are trying to get the exemption level up to $5 million."
Wolff says Farm Bureau would like to get rid of the estate tax altogether, but there are simply not enough votes to make that happen. Farm Bureau has stressed to Congress that estate taxes can hit farm families harder than other small business owners because 84% of farm assets are real estate-based.
Meanwhile, a new study has been released by the American Family Business Foundation that indicates as many as 1.5 million additional jobs could be lost if Congress allows the Federal Estate Tax to return next year. The report's author, Douglas Holtz-Eakin, former director of the Congressional Budget Office, says with fears of a double dip recession on the horizon, the last thing America needs is for Congress to threaten family-owned businesses with a huge tax increase, an increase that could put more jobs on the chopping block.
The study concludes that if the estate tax were reinstituted at a 65% rate, more than 1.6 million jobs would be lost. If Congress takes no action and the estate tax returns to the rate of 55%, between 1.4 million and 1.5 million jobs would be lost.