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YOUR FINANCES
The Second Bush Administration and Your Money
by Kevin McCormally

Estate-tax repeal. The federal estate tax is gradually being phased out, thanks to the 2001 tax cut. Under current law, the much-vilified "death tax" disappears in 2010, only to be resurrected in 2011.

President Bush wants to eliminate it forever and, because he has a good chance to succeed, may make this an early priority. In his favor: The estate tax brings in relatively little revenue, in part because Americans spend so much money to avoid it. In 2004, the estate tax will collect an estimated $24 billion, or less than 1.5% of federal revenues. By some counts, as many as 59 members of the incoming Senate support permanent repeal. Sixty votes is all President Bush needs. If he wins in the Senate, the House will be a piece of cake.

One fly in the ointment: Eliminating the tax could mean that capital gains on assets owned at death, which are now tax-free, could be taxed to heirs.

Tax reform. Those folks making over $200,000 to whom John Kerry promised a tax hike can breathe easy. The 39.6% bracket ain't coming back, and the 15% rate for capital gains and dividends is safe. In fact, the President wants to make all of his tax cuts permanent -- rather than allowing them to "sunset" around the end of the decade -- and promises fundamental tax reform to greatly simplify the system.

But making the cuts permanent would cost a fortune (which is why they were designed to disappear) -- perhaps $2 trillion over the next decade. Plus, many of the popular cuts scheduled to expire, including the $1,000 child tax credit and the special 15% tax on dividends, pile complexity into the law. Pleasant complications, perhaps, but complications nonetheless.

If the cuts become permanent, achieving fundamental tax reform will be even tougher. After all, replacing the income tax with a national sales tax or a flat tax would mean eliminating all those "permanent" breaks.

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