Unemployment Benefit Extension Returns To Front Burner

In a deal struck between President Obama and Senate Republican leaders, legislation extending federal unemployment benefits for an additional 13 months, up to a total of 99 weeks, could be on the way to passage in both houses of Congress very soon. Trading the unemployment extension desired by Democrats for extension of Bush era tax cuts to even the wealthiest Americans for 2 years, Obama went against the grain of his own party politically. In his own defense, Obama said at a press conference yesterday “A long political fight carried over into next year might have been good politics, but it would be a bad deal for the economy, and a bad deal for the American people.”

The compromise package, carrying a price tag of a $700 billion increase in the nation’s deficit, includes the tax cut extensions, unemployment benefit extensions, a 2% cut in FICA taxes withheld from paychecks of working Americans, reinstatement of a 35% estate tax on inheritances of more than $5 million from a single decedent and $10 million per couple, and extension of the college tuition tax credit due to expire December 31, 2010. Also, businesses making capital investments next year will be permitted to expense the entire amount, rather than amortizing it over the life of the asset. The tax savings in 2011 are expected to total $120 billion for wage earners, and $150 billion for businesses.

Defending the deal, which comes on the heels of dual Senate defeats for proposals to extend the Bush era tax cuts only to families earning less than $250,000 per year, and then only to those earning over $1 million per year, Obama said: “The number one priority is doing what is right for the American people.”

Estate Tax Extension Faces Suffocation In The Senate

Thursday’s House vote of 225-200 in favor of permanently extending the estate tax at a rate of 45% on individual estates over $3.5 million and family estates over $7 million is no guarantee that the Senate will even take up the bill before the estate expires January 1, 2010. Senate Minority Whip Jon Kyl says Democratic Congressmen and Senators will be in for a rude shock when the estate tax revenue disappears in a puff of smoke New Years Day. Republicans universally oppose extending the tax, and enough Democrats crossed the aisle to vote against the extension in the House to suggest that mustering 60 Senate votes to continue making death a taxable event could be a real challenge for Senate leadership.

Estate Tax Compromise - Another Attack On Small Businesses

The American Family Busiuness Institute came out swinging yesterday in an e-mail blast opposing the Senate estate tax compromise supported by 46 trade associations in a September 24, 2009 letter. The Senate proposal would permanently extend the estate tax, though at a compromise rate of 35% on the portion of estates over $5 million in value. Unhappy with the collapse of opposition to an estate tax extension by the U. S. Chamber of Commerce, the National Association of Manufacturers, and the National Federation of Independent Businesses, among other major trade groups, AFBI's e-mail says the Institute is "deeply disappointed by the Chamber's and NFIB's decision to abandon small businesses and farms in the name of compromise."

Of course, family owned construction contracting businesses of all sizes are another segment of the economy directly affected by continuance of the estate tax at a confiscatory 35% rate. Ownership succession planning in capital intensive construction businesses is complex enough without having to think about cashing out when the government suddenly wants to take 35% of the value of the company.