SENATE MAKES NO PROPOSED CHANGES TO ESTATE TAX IN EXTENSION BILL

I think that we all know that the only thing going on in Washington between the Republicans and the Democrats is positioning for the upcoming elections. Bills are submitted in the Senate (controlled by the Democrats) and in the House (controlled by the Republicans) that will never become law because it takes both bodies and the President to make the provision law. So bills are passed by one of bodies with the realization that the other body will vote it down. Just positioning. At the same time, the defective proposals give us some indication of the thinking which could eventually become law if they ever get serious about doing their job. 

Senate Democrats removed any mention of the estate tax in a Bill that is currently headed to the floor. This proposed Bill will now extend the 2001 and 2003 “Bush” tax cuts for families earning $250,000 or less. An earlier version of the Bill would have included a maximum estate tax rate of 45% while dropping the exclusion level to $3.5 million. With the new changes to the Bill, the maximum rate will be 55% with only a $1 million exclusion amount.

This new Bill would set the top rates for dividends and capital gains at 20% (plus the Medicare Surtax of 3.8% if applicable); reinstate the phase-out of personal exemptions and certain itemized deductions for higher income households; and extend certain credits such as the education credit, child tax credit and earned income credit for another year. The Section 179 expensing limits would be set $250,000 for 2013 and probably most important, it would provide for another one-year“patch” to the alternative minimum tax for 2012.

The chance of this passing is about as good as farmers having record yields this year.