| It's Coming Back! The Estate Tax is coming back. That | | | | Impact of New Spending. What has changed so |
| is the growing consensus of observers of what is | | | | soon? Look at some numbers from the Heritage |
| happening on Capital Hill. | | | | Foundation report of July 2009: |
| $3,500,000 exemption for 2009. This year, 2009, each | | | | *Spending Surging. Spending and deficits are surging at |
| person has an exemption from federal estate taxes | | | | a pace not seen since World War II. |
| of $3,500,000. This means that unless you have life | | | | *$33,932 per household. Washington will spend |
| insurance, real estate, savings and retirements funds in | | | | $33,932 per household in 2009 which is an increase of |
| excess of $3,500,000, you do not pay any federal | | | | $8,000 from 2008. |
| estate tax. If you live in Virginia, you don't have any | | | | *2008 Deficit $466 B. Federal spending was $3,031 |
| Virginia estate tax. But, if you live in DC or Maryland, | | | | billion in 2008 with a deficit of $466 billion. |
| you have state estate taxes if you have more than | | | | *2009 Deficit $1,845 B. Federal spending in 2009 will be |
| $1,000,000. | | | | $4,004 billion with a deficit of $1,845 billion. |
| Easy to be a millionaire. For many people, it is | | | | *Large Deficits Through 2019. Federal Spending is |
| surprisingly easy to have an estate over $1,000,000, | | | | projected to continue to exceed revenue by a large |
| but difficult to exceed $3,500,000. Let us say you | | | | gap through 2019. |
| bought a house for $50,000 and it is now worth | | | | *32.1% Jump in 2009. Federal spending grew by 4.9% |
| $500,000. You have a retirement fund of $150,000 and | | | | in 2008 and by 32.1% in 2009. |
| other savings of $75,000. We are talking about | | | | *Spending Will Stay High for 10 years. President |
| someone who considers themselves as middle class | | | | Obama's budget proposal has per household spending |
| and not rich. They also have a small term life insurance | | | | at $33,392 in 2009 and ten years later in 2019 at |
| policy with a death benefit of $250,000 and another | | | | $33,312, indicating a continuing high level of spending. |
| $150,000 life insurance from their work. The death | | | | *Annual Increase is 8%. Since 2001, spending has |
| benefit of the life insurance is part of their taxable | | | | increase at an average annual rate of 8%. If this rate |
| estate if they die while the insurance is in effect. Under | | | | continues for the next ten years, there will be massive |
| the estate tax calculations with a $1,000,000 | | | | requirements for new revenue. |
| exemption, you have a taxable estate of $1,150,000. | | | | *Social Spending To Consume All Taxes. By 2050, |
| Wealthy Escape at $3.5 million. Compare this to Mr. | | | | spending just for Social Security, Medicare and |
| And Mrs. Wealthy. They have $1,000,000 in real estate, | | | | Medicaid will consume all of the federal taxes that the |
| $1,000,000 in investments, another $2,000,000 in a | | | | federal government usually collects as a percentage |
| family owned business, and insurance of $2,000,000. | | | | of the economy. |
| Their total taxable estate is $6,000,000, but they pay | | | | *Massive Tax Increases Needed. To just pay for |
| no estate tax when the estate tax exemption is | | | | Social Security, Medicare and Medicaid, taxes will have |
| $3,500,000 per person and their living trusts both use | | | | to increase from less than $1000 per household in 2010 |
| their $3,500,000 exemption (Two times | | | | to $3,000 by 2020 and over $12,000 per household by |
| $3,500,000=$7,000,000 which is greater than | | | | 2050. |
| $6,000,000). | | | | *Spending Increases without 2009 Problems. This |
| Bush Taxes Cuts Expire. The $3,500,000 exemption is | | | | spending is not temporary and will continue to increase |
| part of the phase out of the estate tax under the | | | | even without the global war on terror, the 2009 |
| Bush tax cuts. Next year, there is a complete | | | | financial bailouts and the 2009 stimulus bill. |
| elimination of federal estate taxes. But at the end of | | | | *Popular Programs Rapid Increase. Spending on |
| 2010, the Bush tax cuts expire. Rumors are that at the | | | | popular programs is growing rapidly. |
| end of 2009, Congress will extend the $3.5 million | | | | *Education up 169%. K-12 spending has surged 169% |
| exemption for only one year, through 2010. Without | | | | since 2001. |
| further legislation, the exemption automatically goes | | | | *Veteran Spending Doubled. Veteran spending has |
| back to the $1,000,000 exemption in 2011 with rates as | | | | doubled since 2001. |
| high as 55%. | | | | *Medicare up 68%. Medicare Spending has jumped |
| $3,500,000 Was Here to Stay. President Obama's | | | | 68% since 2001. |
| election platform included a promise to keep the | | | | *Interest Will Consume 2/3s of Deficit. By 2019, net |
| exemption at $3,500,000 and he implements his | | | | interest costs will be two thirds the size of the entire |
| promise in his budget assumptions for future years by | | | | budget deficit. |
| use of a $3,500,000 exemption. Earlier this year, I and | | | | Looking for Found Money. Congress is considering cap |
| many people who follow developments in Congress | | | | and trade and health care legislation which involve |
| predicted that Congress would extend the $3,500,000 | | | | large tax increases. There is a major search by |
| exemption for years to come. Most estate tax | | | | Congress through the tax code for ways to pay for |
| commentators saw the $3,500,000 exemption as the | | | | desired projects and plans. Most plans target the |
| logical answer. | | | | "wealthy" for increased taxes. |