There are alot of chain emails being forwarded that are full of Tax fallacies and incorrect facts. Allow me to correct any misconceptions you may have about any 2011 tax increases. It’s not true that “you will be required to pay taxes” on the value of employer-paid health insurance benefits. This is a falsehood that circulated as a chain e-mail. It is true that the new health care law requires employers to report the value of health insurance benefits on W-2 forms starting next year, but that’s for informational purposes only. The remainder of the chain e-mail message contains misleading claims about what “will” happen next year that were copied and pasted — nearly word for word — from an Americans for Tax Reform document dated July 1. (The garish colors were added by the anonymous author of the e-mail message.) For the most part, these are “hikes” that the president and Democratic leaders in Congress have long said they won’t allow to take effect, except for individuals making more than $200,000 a year, or couples jointly making more than $250,000.
There is also a rumor about a supposed “Death Tax: Only on Multimillion-Dollar Estates”. The message is also misleading in what it says about the temporary repeal of the federal estate tax — which Republicans like to call the “death tax.” Under terms in the Bush tax cuts, the estate tax was phased down over several years and eliminated entirely for those who die in 2010, but it’s set to return in 2011 at levels that prevailed before 2001. So just as the message says, for those dying after Jan. 1 next year, estates of more that $1 million would be subject to taxation at rates as high as 55 percent on amounts over that threshold. But that will happen only if Congress fails to act, and there’s little sentiment in Congress, even among Democrats, for allowing that to happen.
In fact, last December the House passed a bill that would have permanently exempted estates of up to $3.5 million from taxation (effectively, $7 million for couples). The top rate would have been 45 percent. All 225 House members who voted for that were Democrats; Republicans opposed the measure because it would have frozen the estate tax at the 2009 level called for in Bush’s phase-down, and would have canceled Bush’s one-year repeal in 2010.
In the Senate, several Democrats want to bring back the estate tax with an even higher exemption and a lower rate. In April 2009, the Senate adopted an amendment to a budget bill that would have set as a target a $5 million exemption ($10 million for couples) and a top rate of 35 percent. The bipartisan amendment was sponsored by Democratic Sen. Blanche Lincoln of Arkansas and Republican Sen. Jon Kyl of Arizona. It passed with 51 votes in favor — 10 of them from Democrats, even though the Senate’s Democratic leadership (and President Obama) had set $3.5 million as a target. The Senate amendment wasn’t accepted by the House, which insisted on keeping the $3.5 million threshhold in the budget bill. With its Democrats divided, the Senate ultimately failed to act on the estate tax, allowing it to expire entirely for 2010.
So Congress has yet to agree on whether to bring back the estate tax only for estates worth more than $3.5 million, or only for those over $5 million. Few if any voice support for bringing it back for estates of more than $1 million. That could happen if the deadlock on this issue continues (again, always a possibility). But majorities in the House and Senate have voted to impose the so-called “death tax” only on multimillionaires.
Be very weary of who you believe concerning Taxes. Feel free to call our tax experts at TaxDr for any questions you may have.
