In baseball and the estate tax, timing is everything
I came of age as a Royals fan, and I agree with George Brett鈥檚 comments at his Hall of Fame induction ceremony, 鈥溾��. George Steinbrenner鈥檚 Yankees tortured my beloved Royals in the late 1970s and early 1980s. I鈥檒l 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鈥檚 Yankees objected to the amount of pine tar on his bat. Ridiculous.
What鈥檚 also ridiculous is that the timing of Steinbrenner鈥檚 death makes such a difference to his heirs. I鈥檓 sure if you asked any of them, they鈥檇 give anything for one more hour of light. But I鈥檓 also sure that they won鈥檛 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鈥檝e to federal taxes on an estate estimated by Forbes to be worth $1.1 billion . His estate would鈥檝e been one of paying the tax that year鈥攍ess than one-quarter of one percent of all deaths. If he hadn鈥檛 died until next year, when the estate tax is scheduled to revert to pre-2001 rules, his estate would鈥檝e joined a much larger crowd paying the tax 鈥� but still tiny in comparison to the entire population鈥�44,200 estates. According to my colleague Bob Williams, Steinbrenner鈥檚 dying in 2011 might have cost his heirs about $100 million more than if he鈥檇 died in 2009. Some basic estate planning could have cut the taxes a lot in either year.
Of course, Steinbrenner鈥檚 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鈥檚 constitutional. Regardless of retroactivity, in the face of our huge budget gap, Congress can鈥檛 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鈥擨 say it didn鈥檛. And it took the New York State Supreme Court鈥檚 Appellate Division to get Steinbrenner to finish the game as Major League Baseball ordered. But there鈥檚 not much argument that letting a tax disappear for exactly one year makes sense. Congress should just restore it.
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