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Estate Tax Changes in the Economic Growth and Tax Relief Reconciliation Act of 2001

If Benjamin Franklin were still alive, his oft-quoted statement would likely have been: “In this world nothing is certain but death, taxes, and politics.”  The estate tax changes in the Economic Growth and Tax Relief Reconciliation Act of 2001 stand as a testament to the absurd results made possible when politicians are permitted to write tax law.  Tax law that are dictated by political agenda hurt everyone.

Although the 2001 changes altered the structure of the estate tax, they were temporary, leaving pundits certain that the law would be changed or made permanent before long.  They were wrong.  The law has remained unchanged for the past 7 years, preventing families from engaging in meaningful planning based on a reliable and predictable tax law.  The federal budget deficit makes it now unlikely that the changes will become permanent.

The absurdity for New Jersey residents is reflected in the chart below, which shows the effect of the 2001 estate tax changes on three estates:

The federal estate tax debate is unlikely to end.  It serves as a useful political tool, allowing opponents of the tax to demonstrate concern for its impact on family businesses and farms, while allowing supporters of the tax to point to repeal as yet another clash between the haves and the have-nots.  The only question remaining is whether the uncertainty will ever end.

Full post as published by New Jersey Law Blog on April 02, 2008 (boomark / email).