Fiscal Cliff for Appraisers?

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It has been in the news for some time now, and we are finally at the point, post election, that congress should finally take action and clear up tax policy for 2013 and beyond. If they dont, many believe we will go over the fiscal cliff.

Of course taxes and tax policy have wide implications on the economy as a whole and should be of interest to all, there are also specific elements which can, and most likely will impact personal property appraisers and future assignments.

Two major areas of interest and concern would be charitable donations and how and at what income level they would apply as well as the estate tax law.  There has been talk,  in the past at limiting charitable deductions, especially for non-cash gifts such as fine and dec arts.  Also on the table is limiting itemized deductions.

For the past two years (2011/2012) we have seen an estate tax exemption of $10 million for couples with a rate of 35%.  The new thought is that is going to change, perhaps to $3.5 million exemption and a rate of 45%.  This of course may increase the need for estate tax appraisals, but some of the other items, such as potential restrictions on donations, may restrict giving, and therefore negatively impact the appraisal profession.

The Economist reports on tax reform

A separate proposal would limit the tax benefit of deductions for mortgage interest, charitable contributions, municipal bond interest, employer-provided health care, and individual retirement plans to 28%, even for taxpayers paying a 35% or 39.6% marginal rate.

Despite their superficial appeal, such proposals face daunting obstacles. Foremost is that they may not raise enough revenue to satisfy Mr Obama. In the run-up to formal negotiations due to begin on November 16th, Mr Obama signalled he would begin by asking for $1.6 trillion in revenue over the coming decade, as his latest budget does. At a press conference on November 14th, he said “it’s very difficult to see how you make up” the revenue lost from failing to restore the higher rates just by closing deductions: “The math tends not to work.” But, he added, “I’m not going to just slam the door” on alternatives that accomplish what he wants.

The second obstacle is the calendar. Politicians are racing against a year-end deadline when Mr Bush’s tax cuts and other stimulus measures expire and automatic spending cuts are triggered. The collective fiscal tightening, if sustained, could push the economy into recession. Even if the two sides agreed that tax reform would be the main vehicle for raising more revenue, the task would be too complex to accomplish by year-end. A smaller deal would be needed to avert the cliff, leaving bigger tax and entitlement changes for next year. The challenge then would be to bind the hands of both parties to consummating a big deal next year.

Source: The Economist