In 2001, under the Bush administration, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was passed. EGTRRA was a huge piece of tax legislation that essentially cut income taxes, estate taxes and more. These EGTRRA tax cuts will expire at the end of this year unless Congress extends them.
Before EGTRRA came to pass there was a good deal of debate among lawmakers about how/if the estate tax rates should be changed. Those against the estate tax wanted a top tax rate even lower than 2009’s 45%, but they agreed to reduce the top tax rate over a period of 9 years to the 45% level and then made up 2010’s 0% tax rate to basically force future policymakers to revisit the issue before the 0% rate took effect.
Well, the current administration called their bluff and chose not to revisit the issue last year so the estate tax has been repealed for 2010. As late as the middle of 2009 I think you could have asked any estate planning attorney in the US whether they really thought Congress would let the estate tax drop to 0% in 2010 and 90% of them would have said, "not a chance". But it did!
And I think there’s plenty of blame to go around. In creating EGTRRA, the red team probably shouldn’t have bet that a 2010 estate tax repeal would be enough to force the current administration (whoever it might be) to revisit the law. And the current blue team should have made a more concerted effort to revisit the law before the 0% reset. No matter what your view is on what the estate tax should be, this estate tax craziness has:
1.) Cost the US government billions in lost tax revenue this year (that’s okay, they don’t really need the money, right?).
2.) Made it confusing as heck for US taxpayers. You die in 2009, you pay a lot. You die in 2010, you don’t pay a dime. You die in 2011, you pay even more.
Shouldn’t we at least be entitled to a logical estate tax law?