Repeal the Estate Tax?

Last week that the House of Representatives passed H.R. 4154, which authorizes a permanent extension of the current $3.5 million exclusion amount for the federal estate tax. Congress has had all year to work with tax issues, but it took until Dec. 3 for the House to take action.

Now it's up to the Senate to take action on this bill. Action? Aren't the Senators busy with the health care bill that might not be resolved until next year? Can the Senate work on two different bills at the same time? So far the answer is probably not.

But what is the problem with not taking action on the federal estate tax before Dec. 31?

The problem is that current law is part of a 10-year bill that expires at the end of 2010. The last year of that bill repeals the estate tax, but only for a year. In other words, if the Senate does not take action during the next 23 days, the estate tax will disappear until Congress can pass a new bill.

Think of it as the Year of the Government Assisted Suicide. What if a patient with a net work of $1 billion is in the hospital, being barely kept alive by a respirator and feeding tube? If the patient dies during 2009, the approximate tax on the estate is about $450 million, but if the patient dies during repeal, even if repeal is only for a month, there is no tax. In other words, the government is providing a financial incentive for you to keep your wealthy relative alive during 2009 so that the plug can be pulled during 2010.

Will life support be cut off for our fictional billionaire patient? Stay tuned for further details in about 23 days.