As of midnight today, the estate tax has been eliminated for 2010. Over the last decade or so, the Republican Party has done an incredible job marketing the estate tax as the "death tax" due to its link to inheritances from people who die. As part of their GOP dominated Congress under President Bush, they gradually lowered the estate tax and eliminated it for a year.
While I am not sure how safe I would feel this year if I had a large estate knowing that next year it returns to its pre-tax cut levels, the tax itself makes a lot of sense.
Republicans have marketed it as taxing the income of the dead a second time, but the tax does not tax the income of the dead; it taxes the income of those who receive it. After all, if the person was still alive, they wouldn't be taxed on it again. However, by passing on the money, it becomes income for someone, and as a result, it should be subject to taxation just like the income of each of us.
As of 2009, the estate tax allowed a $3.5 million exemption for a single person and $7 million for a couple; and if allowed to revert those numbers will become $1 and $2 million respectively.
Republicans for fiscal responsibility may want to stand up in this case considering a repealing of the estate tax would cost $1.3 trillion dollars over 10 years, while benefiting less than 1% of Americans. Keep in mind, they are loudly protesting about the budget impact of Health Care Reform for you and me that costs under $1 trillion dollars, but support saving the richest among us $1.3 trillion? Maybe they ought to get their priorities straight.
Congress has promised to address this quickly and retroactively effective to January 1, 2010 and will probably end up some where in between the two numbers of the full tax cut and the pre-tax cut number around $4 million for a couple. It sounds like a fair compromise, but it is still more than twice what the average American will make in their lifetimes for doing nothing but being born in the right gene pool.