From: nealg@cray.com (Neal Gaarder)
Subject: Re: Change in law re: inheritance tax?
Organization: Cray Research, Inc.
Date: 12 Nov 92 10:55:52 CST


I left out the phrase about a new IRA tax in my previous post:


In article <1992Nov12.105039.16903@hemlock.cray.com> nealg@cray.com (Neal Gaarder) writes:
>In article <1427800051@igc.apc.org> McAldon International Inc. <mcaldon@igc.apc.org> writes:
>>
>>|Does anyone know about a proposed change to reduce the
>>|estate tax "deduction" from $600,000 to $200,000?
>>|I've heard that the bill will go to Clinton the first
>>|of January and that the only question is when the new
>>|law will become effective (the date of signing or the
>>|date out of committee). 
>>|Anyway, this is what I've heard from a broker. Can
>>|anyone confirm and give me details?
>>|Ann Bishop
>>
>>This is a rumor or possibly a trial balloon to test attitudes. Nothing
>>by anybody in a position to affect tax laws has been mentioned.  Some
>>advisors have been spouting the dubious wisdom of utilizing the
>>lifetime credit of $600,000 now, before the law is changed, without
>>realizing that the credit may not be grandfathered in if the law is
>>modified.  It has also been rumored that the $10,000/person exemption
>>might be altered and this is one that should be utilized if appropriate
>>if you are worried, since it would not be affected retroactively.  There
>>would be great resistance to gutting the $600,000 credit provision by
>>small business people and farmers, whom it was mainly designed to 
>>protect.  If it were to be changed downwards, life insurance companies
>>selling key-man insurance would benefit greatly.  I would also expect
>>to see a surge in incorporations.  DMcKenzie
>>
>>|    mcaldon@igc.org     | Opinions dispensed herein not guaranteed |
>>|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
>>
>
>It was part of a Democratic long-term health and nursing care bill 
>for about three weeks and has been replaced by a call for $45 
>billion of unspecified "broad-based taxes" in that bill.  Quoting 
>an editorial in the November 2, 1992, Wall Street Journal:
>
>"Last April, the Democratic leadership, led by Richard Gephardt and
>George Mitchell, introduced two companion bills to provide long-term
>health and nursing home care for all Americans. Buried in the Senate
>bill was a section outlining the new taxes that would pay for it. No
>doubt it's coincidence that the new taxes came to $45 billion."
>
>"The most controversial item would reduce the current estate tax 
>exemption from $600,000 to $200,000. That's the smae level at which
>Governor Clinton's promised higher income tax rates would begin.
>Today only 3% of Americans pay any estate taxes.  But lowering the
>threshold to $200,000 would mean an estate consisting of 
>the health care bill submitted in April by the Democratic leadership
>contained 235 lines detailing the tax increases totalling $45 billion.
>After three weeks the 235 lines were replaced by a call for 'broad-based
>taxes'.  But lowering the threshold to $200,000 would mean an estate
>consisting of little more than a house and a life insurance policy
>could be taxable.  A $400,000 middle-class estate would be hit with
>$67,000 in new taxes. An estate worth $600,000 would pay $138,000. A
>Democratic drafter of the bill told the San Diego Union that he put
>in higher estate taxes because "if we have helped people with their
>long-term care, it is only fair to tax them when they die.
>
>"Other health-care-driven taxes laid out in the Democratic wish list
>included an increase of 1% in the payroll tax on all wages over $5,000
>a year, a new 2.5% tax on unearned income that would even include
                        ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                        on IRA contributions and payouts and a 2.5%
tax on unearned income that would even include

>interest from state and local municipal bonds.
>
>"The Democratic leadership soon blinked.  Three weeks after
>introducing the bill they announced it was 'an incorrect version.'
>They substituted a new bill that dropped the 235 lines detailing the
>tax increases, and replaced them with 13 lines of boilerplate calling
>for 'broad-based taxes.'  Everyone expects the bill to return next
>year.
>
>"A spokeswoman for Bill Clinton says 'he doesn't support higher 
>inheritance taxes or taxes on the middle class.' But she declined to
>say he would veto a long-term-care bill that included such financing
>mechanisms.  The issue here is whether a President Clinton would veto
>a bill pushed by the entire Democratic leadership and all of the
>party's interest groups.  One out would be to pull a Clinton by
>claiming he opposed the taxes 'in principle,' but not enough to scrap
>the entire bill.
>
>"The Governor has been promising that only incomes 'over $200,000'
>would face higher taxes.  But if that were suddenly redefined to 
>mean aggregate wealth instead of income, many Americans who never
>thought of themselves as rich might find themselves sending much of
>their inheritance to Congress."
>
>
>This is more than a trial balloon, because a Clinton health care bill 
>will be proposed.   A bill may be ready to sign, but the means for
>paying for it are no longer spelled out.
>
>
>Neal Gaarder


Newsgroups: misc.taxes