Lawmakers asked to lower estate, trust tax rates.Several professional groups including the American Institute of CPAs, the American Bankers Association The American Bankers Association (ABA) is comprised of banks and other financial institutions. It seeks to promote the strength and profitability of the banking industry by Lobbying federal and state governments, building industry consensus on key issues, and providing products and and the American Bar Association American Bar Association (ABA), voluntary organization of lawyers admitted to the bar of any state. Founded (1878) largely through the efforts of the Connecticut Bar Association, it is devoted to improving the administration of justice, seeking uniformity of law have written and visited members of congressional taxwriting committees and the Treasury Department urging them to reduce estate and trust tax rates. The Tax Reform Act of 1986 and the Omnibus Budget Reconciliation Acts of 1990 and 1993 have combined to increase tax rates and compress rate brackets for estates and trusts. Before the TRA's passage, estates and trusts were taxed at the highest income tax rates applicable to individual taxpayers--those pertaining to married persons filing separate returns. Now, the 15% income tax bracket Noun 1. income tax bracket - a category of taxpayers based on the amount of their income income bracket, tax bracket bracket - a category falling within certain defined limits for estates and trusts ends at $1,500, as compared with $18,450 for married persons filing separate returns; the 39.6% surtax An additional charge on an item that is already taxed. A surtax is a tax on a tax. For example, if a person pays one hundred dollars of tax on one thousand dollars of income, a 5 percent surtax would amount to an additional five dollars. rate levied on all taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. in excess of $7,500 for estates and trusts applies to taxable income above $125,000 for married persons filing separately. In a letter to members of the House Ways and Means WAYS AND MEANS. In legislative assemblies there is usually appointed a committee whose duties are to inquire into, and propose to the house, the ways and means to be adopted to raise funds for the use of the government. This body is called the committee of ways and means. and Senate Finance Committees, Harvey Coustan, then chairman of the AICPA AICPA See American Institute of Certified Public Accountants (AICPA). tax executive committee, said the highly compressed rates have a harsh effect on many trusts and estates. "The greatest areas of difficulty," wrote Coustan, "arise when there is a need to accumulate income for nontax reasons." For example, estates may need to accumulate income to pay bequests and debts, and trusts may need to build a fund for the future education of minor children or for the care of surviving spouses, orphans, elderly parents or the disabled, the letter said. A letter from members of the American Bankers Association said the 1993 tax act unfairly targeted estates and trusts on the incorrect premise that wealthy taxpayers use them to shelter income, and that the bill perpetuates a "discriminatory effect against two types of entities that are commonly used by the middle class." Coustan wrote, "There is nothing sinister or subversive about estates and trusts." The letters suggested that restoring estate and trust tax rate brackets to the highest individual income tax rate brackets could lead to revenue gain as trusts accumulate income they otherwise would be driven to distribute to lower-bracket individuals. "Even if there is revenue loss," wrote Coustan, "it would be in those circumstances when there is the greatest nontax objective." |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion