Estate Tax Eliminated, Budget Gaps Widened

The estate tax continues nonexistence. On Thursday when the Senate passed a bill extending tax cuts which virtually eliminates the estate tax for most individuals, according to the New York Times in an article titled “Estate Tax Will Dwindle Under Tax Cut Package” by Paul Sullivan, published on December 17, 2010. The bill will extend tax cuts for the next two years.

Federal Budgets Affected by Extended Tax Cuts

The extended tax cuts may cause havoc upon the Federal budget, due to projected loss of tax revenue. The bill is expected to cost the Federal government $858 billion over the next ten years, reported Ocala Business Journal in an article titled “Stearns supports tax plan that president signed” by Bill Thompson, published on December 17, 2010. This will widen the already deep Federal budget gap.

State Budgets Affected by Estate Tax Cuts

The extended tax cuts will also have profound affects on some state budgets. As a result of the extended estate tax cuts, California’s budget was revised to reflect an additional $2.1 billion deficit, according to Business Insider in an article titled “California’s Deficit Jumps to $28 Billion as Tax Deal Rips Away Vital Income” by Gus Lubin, published on December 9, 2010. California’s budget shows a $28.1 billion gap over the next 18 months.

Keeping Money in the Pockets

For some the extended tax cuts will mean keeping money in their pockets. The hope is that the increased capital in the hands of individuals will help stimulate the economy. Economic indicators had recently showed small signs of recovery, according to an article on Seeking Alpha titled “Stocks, Led by Tech, See Slim Gains, But Europe Worries Weigh” published on December 17, 2010. However, this will only stimulate the economy if people actually spend.

Despite signs of recovery, the large projected budget deficits and inflated currency is what began the economic collapse in the first place. The estate tax cuts could cause the economy to head down an all too familiar path. It would be difficult to reverse the damage once President Obama signs the bill, which would extend tax cuts for another two years.