As of January 1, 2010, the federal estate tax falls to 0 percent. Unfortunately, as of Jan. 1, 2011, it returns to a top rate of 55 percent.

From The Blog of the Legal Times, “Estate Tax Battle Looms in 2010“:

“I think we all were really hopeful that everyone would come together and find that sweet spot that everyone could accept,” said Dena Battle, director of tax policy for the National Association of Manufacturers.

In the new year, lobbyists expect a rare effort to retroactively tweak the tax, which many are prepared to fight. . “I think there is going to be a significant effort to try and get this matter resolved early on,” Battle said. Chris Walters, manager for legislative affairs for the National Federation of Independent Business, said that “any tax increase that’s retroactive is unacceptable.”

USA Today reports taxpayers may be surprised to find that many estates are now taxed as capital gains. From “Estate tax set to expire Thursday“:

In the meantime, what might seem like a potential tax savings has become a guessing game for taxpayers, accountants, estate planners and tax lawyers. The impasse also could mean capital gains taxes on more inheritances.

“No one believed that Congress in its ultimate wisdom, with all the deficits looming, with a recession and two wars … would ever allow the estate tax to lapse. But that’s what’s happening,” said Martin Press, a tax attorney in Fort Lauderdale. “It’s created great uncertainty.”

Yes. Great, great uncertainty — and life-and-death consequences. From The Wall Street Journal, “Rich Cling to Life to Beat Tax Man“:

“I have two clients on life support, and the families are struggling with whether to continue heroic measures for a few more days,” says Joshua Rubenstein, a lawyer with Katten Muchin Rosenman LLP in New York. “Do they want to live for the rest of their lives having made serious medical decisions based on estate-tax law?”

UPDATE (6 p.m.): The expiration has definitely changed individual behavior, as witness USA TODAY’s founder, Al Neuharth, who writes a column, “For old, sick, rich is 2010 year to die?”:

In anticipation of the long-awaited death of the death tax, some at-risk people postponed some things until 2010. I know one person (me) who delayed until next week elective knee surgery (on both knees) that doctors recommended several years ago.

The odds are against my demise from that now rather-common surgery. But I decided to wait because I’ve carefully planned how to preserve in every way possible as much as possible of my little nest egg, not just for my wife but also for my eight children and two grandchildren.

Haven’t quoted Larry Kudlow in quite some time. Rectifying that now, noting his post in NRO’s The Corner, “Washington Needs to Help Businesses for a Change“:

You can begin by stopping the taxing of overseas corporate profits. Do not hike the minimum wage. Back off cap-and-trade. Do not nationalize health care. Stop the anti-trust assault on phone companies, pharmas, Google, airlines, and multi-nationals.

And how about a six-to-twelve-month payroll-tax holiday? That would make it cheaper to hire new workers. What about a corporate tax cut? And immediate cash expensing for business-investment write-offs? In other words, cut the tax cost of hiring, investing, and doing business. Because it’s businesses that create the jobs and the incomes for families all throughout America.

And if you are still worried about the housing story or bank toxic assets, how about a capital-gains tax holiday?

Does anyone in Washington understand the way the world really works? It’s called incentives. That’s what this is all about. And we’re going to need many more of them if businesses, investors, and families are to start prospering once again.

As we’ve noted before, too many politico like jobs just fine, it’s the jobs-creators they’re not so fond of. And those jobs-creators are business.

From the Washington Post, “Obama’s First Budget Seeks To Trim Deficit“:

Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.

Current rate of 45 percent? Yes, but it’s also important to point out that under tax legislation enacted in 2001, the death tax is phased out and ultimately repealed in 2010. That is, a rate of 0 percent. Absent new legislation, the tax will revert to rates as high as the confiscatory level of 55 percent in 2011.

Also, instead of encouraging investment through capital gains reduction, it appears President Obama’s plan would raise the tax, discouraging investment.