Estate Tax Compromise?

You always knew that the Bush plan for the estate tax couldn't possibly be allowed to happen: it first called for estate tax to fall a little, bit by bit, with the exemption raised bit by bit, over a decade, until it got down to 45% in 2009, with a $3.5 million exemption, where it in fact is now. Then it's supposed then to be zero in 2010. Not just lower, not just a higher exemption, but zero, nada, no estate tax at all. But only for people who die in 2010! Then it's supposed to snap back to the old rate of 55% with a $1 million exemption for anyone who dies after that.

Talk about your death panels! The Bush estate tax plan has wealthy parents hiring bodyguards and cancelling plans to invite their kids over for the holidays next year.

Just kidding -- I hope -- but it's certainly true that the plan creates the most perverse economic incentive ever. If your parents are wealthy (and are leaving their money to you), then if they die in 2010, you keep it all, but if they live one extra day, it could cost you millions.

Anyway, that's why I've been saying all along that the estate tax will never go to zero, but neither will it ever snap back to the old rates, which were too high. And now the House has voted to keep the 2009 rates on a permanent basis. Personally, I thought the best answer was a lower exemption and a rate of about 30%, but I'll live with the House proposal -- and hopefully, my parents can now keep living too!