Next battle at the edge of the cliff: property taxes
Many Republicans say the inheritance tax should be banned altogether. But some have said that if the tax were to stay, it would have to be at current levels of 35 percent on a $ 5 million exemption.
President Obama has proposed setting the inheritance tax rate at 45% – above current rates but below the 2001 rate. He supports a $ 3.5 million exemption – also at mid path between today’s level and the 2001 exemption.
Some Democrats, however, have broken ranks with the president. Senators Max Baucus of Montana, Mary Landrieu of Louisiana and Mark Pryor of Arkansas, all Democrats, are siding with the Republicans in proposing that the current rates be made permanent. They say the increases would hurt farmers.
According to the non-partisan Tax Policy Center, inheritance tax generated $ 10.6 billion in revenue in 2012 and is expected to generate $ 12 billion this year. (Read more: A rich job to beat the “cliff of dividends”)
If current rates are extended, inheritance taxes will increase by $ 13.5 billion in 2013 and $ 161 billion by 2021. If inheritance tax expires and returns to pre-cut levels Bush tax, the estate tax will increase by $ 531 billion by 2021.
Under Obama’s plan, with a rate of 35% and an exemption of $ 3.5 million, the inheritance tax would raise $ 258 billion by 2021.
In an interview with the Great Falls Tribune, Senator Baucus said that “these tax cuts, which help farmers and ranchers pass their farm assets on to their children, expire at the end of 2012.”
Tax data suggests that farmers account for a very small amount of property taxes paid. According to the Tax Policy Center, of the 3,270 taxpayers paying inheritance tax in 2011, less than 50 were small farms and businesses, accounting for just over one percent of total inheritance taxes paid.
In contrast, the richest 1% paid almost 80% of inheritance tax last year. The richest 0.1 percent paid almost half.