Are the Uncertainties In Our Estate & Gift Tax Laws A Strategy to Stifle Tax Planning?
Here is an idea that I have not heard before: the uncertainties in our estate and gift tax laws are a strategy employed by the government to stifle tax planning. Could that be? It is doubtful that there are a large group of lawmakers who are acting in a collective and conscious manner to keep our estate and gift tax laws in flux. However, it very well may be that there is a small cadre of lawmakers doing just that. Such a strategy would be the equivalent of a “law filibuster.” There certainly are reasons why the government might employ such a strategy.
The uncertainty in the estate and gift tax laws benefit the government. The uncertainty has created apathy and caused a number of affluent taxpayers to put off talking with their estate and tax advisors. The thought is "Why bother planning my estate now when the laws are going to change in a few years?" Similarly, tax advisors are currently less likely to recommend various tax avoidance techniques (due to the irrevocable nature of such techniques) in light of the uncertainties. The net result is fewer affluent taxpayers employing tax avoidance measures. Fewer tax avoidance measures will eventually result in more tax revenues for the government. So is this a strategy to raise tax revenues without politicians having to risk telling taxpayers that they intend to raise taxes?
The timing of this uncertainty in the law is uncanny given the fact that the Baby Boomers are about to transfer the largest amount of wealth that world has ever seen. While transfer tax revenues do not currently make up a large portion of our government revenues, it is likely that they will after the Boomers start transferring their wealth. So the government will really benefit if the uncertainty were to continue for a couple of more decades.
The uncertainty in the estate and gift tax laws has been around for a while now, but it really became an issue when President Bush enacted the Economic Growth and Tax Relief Reconciliation Act of 2001. Yes transfer taxes are controversial and politics is often a slow business, but this uncertainty has carried on for a long time now. There really is no reason why half a decade later we still do not have answers to the issues posed by the 2001 legislation.
These issues leave me wondering whether the uncertainty in our estate and gift tax laws is intentional on the part of a small group of lawmakers or if the government inadvertently stumbled on a way to stifle tax planning? If either of these is the case, should we expect the current uncertainty to continue into the foreseeable future? Should we expect the uncertainty strategy to be applied to income and excise taxes?
It looks like some of our lawmakers are pretty close to reaching a compromise. Hopefully the compromise will result in legislation that clarifies our current estate and gift tax laws. If the compromise does not result in clarifying legislation then that would seem to support the notion that the uncertainties are an intentional strategy to stifle tax planning. The compromise could also result in legislation that prolongs the uncertainties in our estate and gift tax laws. That too would support the notion that the uncertainties are an intentional strategy to stifle tax planning.
It will be interesting to see how the most recent compromise plays out...
The uncertainty in the estate and gift tax laws benefit the government. The uncertainty has created apathy and caused a number of affluent taxpayers to put off talking with their estate and tax advisors. The thought is "Why bother planning my estate now when the laws are going to change in a few years?" Similarly, tax advisors are currently less likely to recommend various tax avoidance techniques (due to the irrevocable nature of such techniques) in light of the uncertainties. The net result is fewer affluent taxpayers employing tax avoidance measures. Fewer tax avoidance measures will eventually result in more tax revenues for the government. So is this a strategy to raise tax revenues without politicians having to risk telling taxpayers that they intend to raise taxes?
The timing of this uncertainty in the law is uncanny given the fact that the Baby Boomers are about to transfer the largest amount of wealth that world has ever seen. While transfer tax revenues do not currently make up a large portion of our government revenues, it is likely that they will after the Boomers start transferring their wealth. So the government will really benefit if the uncertainty were to continue for a couple of more decades.
The uncertainty in the estate and gift tax laws has been around for a while now, but it really became an issue when President Bush enacted the Economic Growth and Tax Relief Reconciliation Act of 2001. Yes transfer taxes are controversial and politics is often a slow business, but this uncertainty has carried on for a long time now. There really is no reason why half a decade later we still do not have answers to the issues posed by the 2001 legislation.
These issues leave me wondering whether the uncertainty in our estate and gift tax laws is intentional on the part of a small group of lawmakers or if the government inadvertently stumbled on a way to stifle tax planning? If either of these is the case, should we expect the current uncertainty to continue into the foreseeable future? Should we expect the uncertainty strategy to be applied to income and excise taxes?
It looks like some of our lawmakers are pretty close to reaching a compromise. Hopefully the compromise will result in legislation that clarifies our current estate and gift tax laws. If the compromise does not result in clarifying legislation then that would seem to support the notion that the uncertainties are an intentional strategy to stifle tax planning. The compromise could also result in legislation that prolongs the uncertainties in our estate and gift tax laws. That too would support the notion that the uncertainties are an intentional strategy to stifle tax planning.
It will be interesting to see how the most recent compromise plays out...
 
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