George Steinbrenner's heirs will pay no estate tax because he passed away in 2010, that is, unless Congress decides to retroactively restore the tax to the beginning of 2010.
I came of age as a Royals fan, and I agree with George Brett’s comments at his Hall of Fame induction ceremony, “I don’t like those Yankees still”. George Steinbrenner’s Yankees tortured my beloved Royals in the late 1970s and early 1980s. I’ll never forget my dad flipping across news channels so my family could watch Brett tear out of the dugout over and over after umpires nullified his home run because Steinbrenner’s Yankees objected to the amount of pine tar on his bat. Ridiculous.
What’s also ridiculous is that the timing of Steinbrenner’s death makes such a difference to his heirs. I’m sure if you asked any of them, they’d give anything for one more hour of light. But I’m also sure that they won’t complain that their inheritances will be much larger because Steinbrenner died this year and not a year earlier or later. You see, 2010 is that magical year when, for one year only, the estate tax disappears. Had Steinbrenner died in 2009 when the estate tax was 45 percent on wealth over $3.5 million, the New York Times estimates his heirs would’ve lost about $500 million to federal taxes on an estate estimated by Forbes to be worth $1.1 billion . His estate would’ve been one of only 5,500 returns paying the tax that year—less than one-quarter of one percent of all deaths. If he hadn’t died until next year, when the estate tax is scheduled to revert to pre-2001 rules, his estate would’ve joined a much larger crowd paying the tax – but still tiny in comparison to the entire population—44,200 estates. According to my colleague Bob Williams, Steinbrenner’s dying in 2011 might have cost his heirs about $100 million more than if he’d died in 2009. Some basic estate planning could have cut the taxes a lot in either year.
Of course, Steinbrenner’s estate may end up owing tax. Many members of Congress want to restore the estate tax retroactive to the beginning of 2010, an action that will employ lots of lawyers to argue whether that’s constitutional. Regardless of retroactivity, in the face of our huge budget gap, Congress can’t afford to forgo the $14 billion an estate tax at the 2009 level would collect this year.
We could argue all day about whether or not the pine tar rule made much sense—I say it didn’t. And it took the New York State Supreme Court’s Appellate Division to get Steinbrenner to finish the game as Major League Baseball ordered. But there’s not much argument that letting a tax disappear for exactly one year makes sense. Congress should just restore it.
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