House of Representatives Votes to Repeal Estate Tax
Fairfax, VA (Law Firm Newswire) June 19, 2015 – Largely GOP-backed measure includes retention of ‘stepped-up basis’ on capital gains.
The House of Representatives on April 16 voted largely along party lines to repeal the estate tax. Seven Democrats joined 233 Republicans voting in favor of the repeal, while only three Republicans aligned with 176 Democrats against the repeal in the GOP-controlled House. The roll call on the estate tax was the first time in a decade that the lower chamber of Congress supported an end to what Republicans have called the “death tax.”
But unlike the previous House vote on the estate tax in 2005, the measure that passed the chamber just after the most recent tax-filing deadline on April 15 included a provision to retain the “stepped-up basis.” The stepped-up basis allows capital gains to avoid taxation if passed to heirs, and there has never been a circumstance in which taxpayers would not be required to pay both estate taxes and capital gains on inherited assets.
“In 2010, the final year of the Bush tax cuts in which the estate tax disappeared for one year, taxpayers could take advantage of the one-year absence of estate taxes but could not then claim the stepped-up basis, or they could retain the stepped-up basis and pay the estate tax, but not both,” said Lisa McDevitt, a prominent attorney in Fairfax, Va., whose firm specializes in estate planning law. “The current legislation, were it to become law, would result in a far more generous shielding of inherited wealth.”
By contrast to the Republican-sponsored repeal of the estate tax, the White House and Democrats in general have opposed an end to the estate tax. Indeed, President Obama’s most recent budget proposal included a reduction of the estate tax exclusion from its current $5.43 million ceiling to $3.5 million per person as well as a hike in the top tax rate to 45 percent from the current 39.6 percent highest rate.
The estate tax repeal faces an uphill path to enactment, as the 54 declared supporters of the repeal in the Senate are six votes shy of overcoming a potential filibuster in the upper chamber. Even if the repeal were to clear Capitol Hill, it would still face a likely presidential veto.
“It is safe to say that the strongly partisan lines of support and opposition toward the estate tax make it highly unlikely that it will be repealed, at least in the current session of Congress and with President Obama in the White House,” McDevitt said. “However, it is also safe to conclude that the recent vote on repeal of the estate tax will emerge as a key campaign issue in the 2016 general election.”Learn more at http://www.mcdevittlaw.net