Define Tax Increase

We are all familiar with the old saying "there are no guarantees in this life other than death and taxes." For those individuals who pass away in 2010 the guarantee was death but not estate taxes. Now I doubt anyone is planning around this one time tax break but if you are taking note, this may not be the case anymore. Now that the Obama administration is scrambling to come up with ways to pay for their spending spree that has caused many "I never met a spending bill I didn't like" politicians to take pause, some guarantees are falling victim to the dreaded "find me if you can" footnote buried in budgets. Recently Lawrence Summers, President Obama's chief economic adviser, declared that "Let's be very clear: There are no, no tax increases this year. There are no, no tax increases next year." I guess its a matter of semantics but the question we should be asking of the President is how does his administration define a tax increase? Politicians love the game of hide the ball and in the case of the recent budget proposal this is exactly what they have done. The President's budget calls for the largest increase in the death tax in U.S. history in 2010. The Wall Street Journal editorial: Night of the Living Death Tax; Obama's Budget Quietly Resurrects It in 2010 details how the announcement of this tax increase is buried in footnote 1 on page 127 of the President's budget. That note reads: "The estate tax is maintained at its 2009 parameters." This means the death tax won't fall to zero next year as scheduled under current law, but estates will be taxed instead at up to 45%, with an exemption level of $3.5 million (or $7 million for a couple). Better not plan on dying next year after all. ...

What is particular distressing to me is the lack of frankness by politicians especially when it impacts our financial future. I know for the readers of this post that death is not something you are contemplating next year but it is the act of stripping from the code a tax break that will benefit some unfortunate to pass away next year without full and open disclosure. If you want to make a case for eliminating this tax break then be forthright with the American public and do not hide your true intentions in a foot note on page 127 of a budget. Some may not see the immediate impact of this but by raising the estate tax many family owned businesses will be impacted and forced to close in order to pay the estate tax. Ask yourself this-- what other tax deductions will this administration take away while making us believe they are not increasing our tax burden. I guess this is more of the "fuzzy math" politicians like to talk about not understanding when secretly they have it mastered.

Posted by Clint Coons, asset protection attorney, Seattle, Washington