Will the repeal of the estate tax be a one-year-only phenomenon? Or will it be extended into 2011? Nobody knows – yet. But there is one thing we do know. Elections Matter.
Less than 48 hours after Americans went to the polls on November 2, David Axelrod indicated that the Obama administration would accept an across-the-board temporary extension of the Bush Tax Cuts, including those for the wealthiest taxpayers.
While Mr. Axelrod made no specific mention of estate tax repeal, there is more to the Bush Tax Cuts than just income tax rate reductions. They also (i) cut the capital gains tax rates, (ii) cut the tax rates on corporate dividends paid out to shareholders and (iii) increased the amount of a decedent’s estate that was exempt from the estate tax, until this year when the estate tax was repealed altogether for decedent’s dying in 2010.
So, if the Obama Administration will not oppose a temporary one or two year extension of the Bush Tax Cuts, might estate tax repeal be included as part of the extension?
I have been of the firm opinion that estate tax repeal would be a one-year-only phenomenon. But now I am not so sure. I never expected the Obama Administration would agree to extend the Bush income tax cuts for high income taxpayers. But if it is willing to give up on that issue unilaterally, it is not unthinkable that estate tax repeal might be part of a temporary extension.
Well, at least it is less unthinkable than it was the day before the elections.
Almost every prediction I have made about what was likely to happen with the federal estate tax has been wrong. Until the very last week of December 2009, I was convinced the Congress and the President would enact some legislative fix to prevent a one-year-only repeal. So I am wary of predicting what will happen to this feature of the Bush Tax Cuts.
But right now, I think extending estate tax repeal into 2011 is “in play.” Stay tuned. We should know by the end of January.