WASHINGTON -- President Obama today signed estate-tax legislation backed by the National Automobile Dealers Association that imposes a maximum 35 percent tax rate on estates of more than $5 million per individual and $10 million for couples.
The estate-tax provision, which will go into effect for 2011 and 2012, is part of a broad tax-cut package that was approved by the House earlier today.
Obama and congressional Republicans had reached an agreement earlier on the deal. It was submitted to Congress earlier this month and passed by the Senate.
The estate-tax portion was criticized as too partial to the wealthy by many House Democrats who sought unsuccessfully to have the maximum rate raised to 45 percent on estates of more than $3.5 million for individuals, and $7 million for couples. That was the 2009 rate.
NADA had lobbied for the larger exemption and the lower tax rate that passed last night, losing only in its quest for the provision to be made permanent rather than for just two years.
“Creating at least a temporary fix will give dealers the ability to plan for the future,” NADA spokesman Bailey Wood said. “We advocated for the largest exemption because dealers have already paid tax once when it was income.”
About half of all U.S. dealerships are family-owned, Wood said. The estate tax is paid not just on the value of businesses, but also on homes, vehicles, boats and other assets owned by a family.
There was no estate tax in effect this year, but the rate was due to increase Jan. 1 to 55 percent on estates of more than $1 million per individual and $2 million per couple if Congress hadn't acted.
440 taxable estates
Under the new estate tax that is about to become law, there would be only 440 taxable estates among all businesses and farms, including auto dealerships, according to a study this month by the nonpartisan Tax Policy Center.
The remainder of the estates would be exempt from paying any inheritance taxes.
The 440 taxable estates will have to pay a total of $2 billion in taxes, or about $4.5 million per estate, the study said.
Under the alternative favored by many congressional Democrats, there would have been 520 taxable estates among all businesses and farms, according to the Tax Policy Center. They would have had to pay a total of $2.9 billion in taxes.