Obama Tax Proposals: A Cure for Insomniacs
If you’re having trouble sleeping these days, consider grabbing a copy of “General Explanations of the Administration’s Fiscal Year 2013 Revenue Proposals,” recently published by the Treasury Department. Also known as the “Green Book,” this annual document dovetails with the President’s budget – a “laugher” in and of itself, and was the subject of recent testimony before Congress by Treasury Secretary Geithner.
Regardless of how you view the chances of the President’s budget actually becoming enacted, the 215 page Green Book does include a few little nuggets which taxpaying folk will find to be of interest.
One “hot” topic of late is the matter of the estate and gift tax law, presently structured at a rate of 35% with a $5 million per person exemption limit. Such is the rule for decedents passing before December 31, 2012, which Obama thinks “provide(s) a substantial tax cut to the most affluent taxpayers that we cannot afford to continue,” says the Green Book. “We need a permanent estate tax law that provides certainty to taxpayers, is fair, and raises an appropriate amount of revenue.”
No argument from us on the matter of certainty – this entire area has been a moving target for more than a decade now. But we’re not sure we like the administration’s proposal: to make permanent the estate, GST and gift tax parameters as they applied during 2009. The top tax rate would be 45 percent and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes.
And while we’re on the subject – another annoyance propounded in the Green Book: modification of the rules governing “valuation discounts.”
For a while, now, planners have been successful in justifying valuation discounts in the measurement of the fair market values of certain forms of property gifted or bequeathed to family members. Noting that judicial decisions over the years have in many cases been pro-taxpayer, Obama proposes new rules which would make it more difficult or maybe even impossible to justify the use of valuation discounts. Result, of course, is more dough for the Treasury. Not good for taxpayers.
On the other side of the ledger, however, you have to hand it to the Big O for coming up with some proposals which actually would appease some taxpayers, though at the expense of others, of course. Such as the one which would provide a tax-free exclusion from income of debt forgiveness related to certain student loans.
Under current law, any debt forgiven under various extant student loan programs is considered gross income to the borrower and thus subject to individual income taxation.
But not any more, if this one flies – student loan borrowers who have been paying for at least 25 years will be able to call it quits with no tax hit because, of course, “For many of these individuals, paying the tax on the forgiven amounts will be difficult.”
Really. And who ever said life was fair?
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult our CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at 831-7288, welcomes comments at firstname.lastname@example.org, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.