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Wednesday, April 22, 2015

House Votes to Repeal Estate Tax

Last week, the House voted to repeal the federal tax levied on estates worth more than $5.43 million for an individual or $10.86 million for a couple. Estates valued at levels higher than these are taxed at rates of up to forty percent. The vote came out to 240 to 179; as expected, it was divided largely on party lines. In reality, though, this tax will almost definitely remain on the books. Even if the Senate voted in its favor--which is extremely unlikely--the President would certainly veto it.

Republican opponents of what they refer to as "the death tax" argued that farmers and small-business owners were unfairly burdened. John A. Boehner, the House Speaker, argued that it deprived them of the opportunity to pass something on to their children and grandchildren. Proponents of the estate tax, however, argued that repealing it would cost the Treasury $14.6 billion in the year 2016 alone, and $269 billion over 10 years.

At the end of the day, though, the tax's repeal would offer little for the majority of Americans. It only accounts for 0.2 percent of deaths anticipated in the United States.

Thursday, April 16, 2015

Regulations Proposed to Protect Retirement Accounts

Federal regulators have proposed rules intended to protect investors' retirement savings accounts from investment planners who do not always act with their customers' best interests in mind. Drawing on academic research, the White House has found that lack of investor protection has cost investors $17 billion annually. Proposed rules would close some of the loopholes which allow brokers to avoid taking on fiduciary responsibilities when giving advice on retirement accounts.

These rules would would update the Employee Retirement Income Security Act, which was enacted in 1974, when many retirees could still rely on pensions. Today, retirees are increasingly dependent on a 401(k). They become especially vulnerable when they turn a 401(k) account, previously managed by their employer, into an individual retirement account. Brokers who advise them on that transaction do not necessarily have to act with their customers' best interests in mind; this can lead to the loss of thousands of dollars for retirees who may end up paying higher commissions as a result. Erisa, as it is currently written, does require that brokers act according to a fiduciary duty when dispensing advice, but "advice" is narrowly defined. The proposed rules would broaden the meaning of advice to include any professional receiving compensation for providing individualized advice.