The fiscal cliff is on many people's minds as the end of the year approaches. Many tax rates could be influenced by decisions made as end of the year nears. Changes to estate tax rates could impact Americans with large estates.
We have discussed the potential estate tax changes on the blog previously, but as 2012 comes to a close, additional viewpoints on the fiscal cliff have been voiced. A group of very wealthy Americans, including Warren Buffett, Bill Gates Sr., and former President Jimmy Carter, support an alternative estate tax plan being proposed by the group United for a Fair Economy.
The current estate tax plan allows for a person to leave a $5 million estate without paying any taxes. If the estate is over $5 million, the estate is taxed at a rate of 35 percent. If a new estate tax plan is not put in place, as of January 1st, any estates larger than $1 million will be taxed at a rate of 55 percent. Estates under $1 million would be exempt from taxes.
Other suggestions have been made for the estate tax. For instance, President Obama proposed setting an exemption of $3.5 million per person, with a tax rate of 45 percent for estates larger than $3.5 million.
This group of wealthy Americans supports a higher tax option. The proposal these wealthy Americans support would allow for a $2 million exemption per person and any estate transfer above $2 million would be taxed at a rate of 45 percent. This plan would bring in more tax revenue than either Obama's plan or the default plan that will go into effect if no new estate tax plan is established before January 1st.
While it remains to be seen how Congress will react to this group's proposal, the fact that alternative suggestions are being made demonstrates the possibility that the pre-Bush era estate tax will not necessarily go into effect. Anyone who would be impacted by this estate tax may want to keep an eye on news out of the capitol in the coming weeks to see if a decision is made.
Source: Forbes, "Buffett, Carter, Gates Sr. and friends call for estate tax with 45% teaser rate amid fiscal cliff negotiations," Ashlea Ebeling, Dec. 11, 2012