Pulling The Plug On Grandma

by digby

I wrote about this a couple of weeks ago, but I honestly didn’t believe this one was possible:

SO, here’s something interesting. At the beginning of 2010, the Bush estate tax plan is scheduled to change such that all estates, up to any value, are excluded. Because the tax bill was passed through reconciliation, however, it has a ten-year time frame, meaning that the law expires at the end of 2010. And that means that the heirs of fortunes received in 2010 will pay no tax, while heirs getting theirs in 2011 will pay 50% of the value of the estate to the Internal Revenue Service.Perhaps you notice the uncomfortable incentive structure here.The House of Representatives voted at the beginning of December to continue the current year policy into 2010; instead of an exclusion for all estates, only those greater than $3.5 million in value would be taxed. That would still leave some bad incentives in place, but it would be better than the current policy path. That left the Senate, graveyard of sensible policy ideas. And the Senate has now abandoned its effort to pass the House extension of the estate tax measure.

I don’t think Bush even dreamed that they’d leave 2010 as it was, certainly not if they failed to eliminate the “death tax” going forward.

All the wealthy grandmas out there had better sleep with one eye open next year.

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