Taxes

The has been a lot of ads attacking the Obama economic plan on taxes. They have been effective enough to muddy the water. I will attempt to clarify some of the differences between the two candidates proposals. Today I will start with the Estate tax proposal.



Under Obama's plan

A married couple will be able to leave an estate to their heirs of upto 7 million dollars tax free.

Once the estate climbs over the 7 million mark there is a graduated tax structure in place starting at 18% for the first $10,000 up to a 45% bracket once the estate is over 8.5 million.

My quick calculation with the help of a National Law Center spreadsheet shows that an estate that was 8.5 Million dollars would incur a tax bill of $555,800.00.

That would leave $7,944,200.00 to pass on to the chosen heir(s).

This would equal an effective tax rate of 6.5% tax rate on a 8.5 Million dollar estate.

The 45% tax rate only applies to the estate after the 8.5 million dollar mark and only after the estate has already passed along 7.9 million to the heir(s).


One last piece of inormation the McCain Estate tax plan as proposed would lower US revenues by 278 billion dollars over 8 years that would either have to be borrowed or cut from budget or a combination of both.

I have added a report from CNNMoney that addresses this issue.
http://money.cnn.com/2008/08/06/smallbusiness/estate_tax.fsb/