By By Jo Bonner
By a vote of 269-156, the House of Representatives last week approved H.R. 5638, the Permanent Estate Tax Relief Act of 2006, which will provide permanent estate tax and gift tax relief for millions of Americans.
As it stands now, an elimination of the federal estate tax – also known as the "death tax" – has been gradually phased in during the past few years and is due to be completely repealed January 1, 2010. Unfortunately, the repeal is scheduled to be eliminated in December 31, 2010, and millions of Americans will once again be forced to pay tax on inheritance they may receive from their parents or other loved ones unless this legislation becomes law.
On April 13, 2005, the House passed H.R. 8, which would permanently repeal the estate tax starting in 2010; however, the Senate has not been able to achieve the 60 votes required to invoke cloture to consider the legislation. Now that H.R. 5638 has passed the House, the Senate is scheduled to debate this alternative legislation this week.
I have long felt the death tax is inherently unfair. Under the current system, an American worker who is attempting to provide an inheritance to leave for their family must pay taxes on their income and on any property they own. Following their death, their beneficiaries must in turn pay taxes on what they receive. In some cases, taxes are sometimes paid two, three, or even four times on the same money and property as they are passed from one generation to the next.
It is simply unconscionable that the federal government levies a tax upon the passing of a loved one – a tax on money that has already been taxed. The legislation passed by the House will provide permanent relief from this inherently unfair tax, allowing Americans who have worked hard their whole lives to pass down the fruits of their labor.
Along with the multiple levels of taxation this entails, there is also the consideration of the time and cost involved in preparing the required forms. The Federal Death Tax Form (Form 706) is a 40-page form which comes with 30 pages of instructions. It has been estimated that to completely and accurately fill out this form would take on average an entire 40-hour work week.
Additionally, as the regulation regarding the "death tax" currently stands, taxpayers are uncertain at what level they will be paying estate taxes – on the current rates which have been gradually decreased during the past few years, at a zero rate when the full repeal takes effect in 2010, or (if this legislation does not pass both houses of Congress and become law) at the original full rate in place prior to the repeal phase-in.
Unless Congress acts before December 31, 2010, the current estate tax exemption will drop to $1 million per person, and the maximum estate tax rate will increase to 55%. While this may seem to some as an unfair break to the wealthy, it is a much needed provision to ensure the continued growth of family-owned small businesses and farms in south Alabama.
If Congress does not act, many families would be forced to sell a business upon the passing of parents just to be able to pay the 55% estate tax incurred upon the parents' death. This legislation would permanently increase the exemption amount to $5 million per person effective January 1, 2010.
By making the repeal of the "death tax" permanent, the House of Representatives has ensured that taxpayers will have the ability to finalize with certainty their long-term financial planning decisions and not worry about any additional burden which might be placed on their families.
The burden of passing this legislation now falls to the Senate, and I am hopeful they will take swift action on this measure to ensure future generations of taxpayers no longer have to worry about the "death tax."
Defense Appropriations Bill Passes House
Recognizing the continuing need for America's military to be the best equipped, best trained, and most well-funded military in the world, the House passed the defense appropriations bill by an overwhelming vote of 407-19.
H.R. 5631, the Department of Defense Appropriations Act for Fiscal Year 2007, provides $427.4 billion in new discretionary spending for the Department of Defense. This annual spending bill funds critical defense needs including troop protection, operation and maintenance, research and development, and emergency wartime appropriation needs.
Among other items, the bill includes:
My staff and I work for you. Please call if we can be of service.
Jo Bonner is a U.S. congressman. His column appear weekly.