In 2013 the top rate jumps to 55%!
Unless Congress takes action, the estate tax relief granted as part of the Bush tax cuts will go away in 2013. The top marginal rate jumps 20 percentage points to 55%, and a 5% surtax on large estates can drive the effective marginal rate up to 60%. Meanwhile, the exclusion, which shields estates below a certain size from the requirement to file and pay tax, declines from $5 million to $1 million.
What does this mean? It means that many people who earn less than $250,000 (the fabled demarcation line for “the rich” in Obamanomics) have a very good chance of paying estate tax. A house in a high cost part of the country like the Northeast or California, plus a reasonably-sized but hardly lavish financial nest egg, and you’re off to the races with the tax man at your heels.
The piece by ATR notes:
According to research by the Tax Policy Center, if the current death tax expires, then the resulting, stricter exemption threshold will force 114,600 estates to file for the tax in 2013 — this represents a 13-fold increase from the previous year’s 8,800 estates, and countless wasted hours filling out tax paperwork. Of that cohort, an unfortunate 52,500 will be liable for the tax, way up from 3,300. … While those 52,500 taxpayers only represent 2% of those who die each year, no one should be fooled into thinking that the effects of this tax fall only on the proverbial “one percent.” The economic incidence of the death tax is far broader, because it causes many wealthy individuals to save less, choosing instead to retire early or, as Milton Friedman put it, “dissipate their wealth on high living”.
Welcome to the brave new world of Big Government. And remember, you didn’t make it there on your own, as President Obama might put it. The political classes were with you every step of the way.