New Year Kicks In Generous Federal Estate Tax Rules

It estimated that in 2009, the federal estate tax will generate about what the federal government will spend on K-12 education that year.

(SILVERTON, Ore.) - Moneyed Oregon families have one more reason to pop open the champagne for the New Year, when a law cutting further the federal tax on inherited wealth takes effect, according to the Oregon Center for Public Policy.

In 2009, the federal estate tax exemption will jump from $4 million per couple to $7 million. This means that the heirs of a widow or widower who dies in 2009 with an estate valued at $7 million will pay no federal estate taxes, according to OCPP policy analyst Janet Bauer.

Only three in 1,000 estates in Oregon will likely be subject to the federal tax under the 2009 rules, said Bauer. She noted that the ratio was 13 per 1,000 in 2000, before a 2001 law enacted under the Bush Administration began to phase in cuts to the federal estate tax.

"If you go to six funerals every single week in 2009, odds are you might attend one the entire year where the deceased's estate would pay any federal tax," said Bauer. "Even the busiest funeral parlor director won't see many individuals subject to the federal estate tax."

In the entire country, under the expanded exemption, only an estimated 140 small farms and businesses will pay any amount in federal estate taxes in 2009, according to Bauer.

"The law is already very generous, exempting 99.7 percent of all Americans," said Bauer. "Any further gutting of the federal estate tax at this point would constitute a giveaway to extremely wealthy households who don't need assistance."

But one more cut to the federal estate tax is on the horizon. Under the 2001 law, in 2010 the federal estate tax will be repealed entirely, but only for that year. If Congress takes no action, in 2011 the estate tax exemption will revert to $1 million, the level in place before the Bush Administration's 2001 tax legislation phased in cuts to the estate tax.

Bauer saw it as unlikely that the 2010 repeal will take effect, noting that Congress has voted several times recently to oppose permanent repeal of the tax and stressing what she called the "nation's urgent budget priorities."

"The country needs to invest in fixing its ailing health care system, upgrading its infrastructure and education system and containing the expanding national debt," she said. "We cannot address those priorities without adequate resources, and the federal estate tax is one of the fairest ways wealthy Americans can support their country."

Bauer estimated that in 2009, the federal estate tax will generate about what the federal government will spend on K-12 education that year.

She called on Congress to protect this important source of revenue and set the exemption for 2010 and beyond on terms no more generous than the rules in place in 2009.

"The federal estate tax is the most sensible revenue tool that the federal government has to create economic opportunity for everyone," said Bauer.

The Oregon Center for Public Policy is a non-partisan research institute that does in-depth research and analysis on budget, tax and economic issues. The Center's goal is to improve decision making and generate more opportunities for all Oregonians.

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Rich January 2, 2009 9:01 am (Pacific time)

SS, you stated: "Harumph SS currently and has been for some time pulling in a profit. Rich people are getting a discount on taxes on the backs of the working people." I am certainly not rich, but I do feel my taxes have been going up very quickly on a state and local level. SS have you tried aquainting yourself with the federal tax tables and see who actually pays a disproportionate share of the taxes? It might surprise you, it sure did me. Also as you know we need more jobs, and who creates those jobs? Our government gets it's authority and revenue from we the people, so do you know of any government agency that runs so well that they should be the creators of wealth? Others may argue that the government can do this, but they fail to provide proof of that assertion, of course they always try in their amusing fashion.

Henry Ruark January 2, 2009 7:59 am (Pacific time)

ss et al: Not "profit" but planned for onrushing heavy demands from Boomer generation. BUT funds diverted into general budget, NOT THERE except as accounting obligation, so small-rise in payroll tax by Congress,clear intention of planned finance, has been diverted, threatening every S/recipient later, while huge tax slashes heavily rewarding rich 1% have been muscled through. H-rump et all know allathis, and their appearances here now part of ongoing neocon noise machine to keep smoke blowing in eyes of general public.

ss sucks January 1, 2009 11:26 pm (Pacific time)

Harumph SS currently and has been for some time pulling in a profit. Rich people are getting a discount on taxes on the backs of the working people.

Henry Ruark January 1, 2009 6:44 pm (Pacific time)

Harumph: Happy New Year to you, sir ! Appreciate your intensity and even your frank expression of sure-and-certain now/seen addled political philosophy. But facts, history, new 21st Century and common sense, as even now sometimes applies, leaves you rather isolated in both ideas and moralities, for most of us, as Nov. 4 action surely did prove pointedly enough to penetrate most heads and minds. But then it takes all kinds to make up the world, as the Founders learned from careful study of then-leading major philosophers, from whom they took many principles built in to our Constitution --which you freely interpret to make your personal interpretation. It may be pertinent to point out here that even Darwin gave up on some species, perhaps a pattern for us here at S-N too.

Harumph January 1, 2009 5:06 pm (Pacific time)

The REAL facts are, that federal spending is approximately three times as much as it should be. There should be no social security, education department, Fannie, Freddie, ANY federal welfare, nor any other "rob the taxpayer to buy votes" programs that have created the cesspool of corruption in DC. The Federal Government should ONLY have a department of Justice, Interstate commerce, Defense, and a small agency to manage the constitutional land holdings it should own... Which are stated in the Constitution. All the excess land, including much of the western states, should be returned immediately to the states themselves. The writers of the Constitution were infinitely wise to restrict the government's powers and ability to confiscate the wealth of the people. That should be restored, and what's been taken should be returned, restoring government to its small and rightful size and costs.

Henry Ruark December 31, 2008 11:57 am (Pacific time)

Sanchez et al: Yours is not only in grievous factual and fiscal error but is plainly pure distortion for personal political pandering; obviously full-line old-stuff from failed, now-perverted conservative play-book. Ours is NOT a socialist-policy government, as 30 years of neocon nonsense since Reagan has surely proven in historical record. (That's histORical, not hysterical as is yours.) Castro/Cuba record has little to nothing to do with what we have accomplished in the U.S.; before we allowed to happen what what we once had at end of New Deal. The estate tax applies only to a mere very small percentage of families, very few of them hurt by its application to comparatively large family accumulations. Easy-to-say re cutting programs "not needed", but note you give NO examples. But that's due to fact huge totals tie to S/security, MedAid and Defense. Name others YOU choose to cut, since public demands specific examples to prove personal judgment --not bolstered by your previous pronouncements here. Facts are facts, and they kill off such distorted fancies re domestic fiscal realities.

Sanchez December 30, 2008 9:33 pm (Pacific time)

This tax should be totally removed. Most of these types of taxes are punitive and revenue for our schools, infrastructure and all other "essential" needs can be acquired by simply cutting spending on programs that are not needed. Socialistic policies have caused us to lose sight on what fiscal responsibility our government is suppose to pursue. We are approaching the point in our taxation, entitlement programs and monolithic government growth that will make Castro's Cuba look good before long. For example New Year's Day marks 50 years of communist rule in Cuba. The Castro oligarchy will trumpet its survival and celebrate. But the reality, up close, is that it's the longest-running failure in the New World, and we are on course to replicate their failure. -------------------------------------------------------------------------------- Spare us the fireworks and media-parroted claims of Fidel Castro's dictatorship bringing universal health care and education to Cuba. The real story is that a prosperous Cuba was turned into ruins in just five decades. Its inflation-adjusted gross domestic product is a mere 5% of what it was in 1958, the year before Castro took over, according to Jorge Salazar-Carillo of Florida International University.

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