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Fixing Estate Tax at 2009 Level Appears to Have Senate Support

  • March 29th, 2007

What to do about the estate tax when the current tax law expires in 2010 has been a subject of intense debate in Congress for the past several years, with Republicans maneuvering for complete repeal of what they deride as the "Death Tax" and Democrats trying to block what they view as a tax break for the rich that could cost the federal treasury hundreds of billions of dollars.

In the last Congress, Senate Republicans fell four votes short of a measure that would have increased the tax exemption to the first $5 million of an individual's estate and set the top estate tax rate at 35 percent.

Now it appears there is bipartisan support in the new Democratic Senate for continuing the estate tax rate at 2009 levels starting in 2010. The top estate tax rate will be 45 percent in 2009, and the exemption will be $3.5 million per person.

The Senate voted 97-1 in favor of an amendment that Sen. Max Baucus (D-MT) proposed adding to the Senate's five-year budget blueprint. The Baucus amendment would make permanent a number of tax cuts set to expire at the end of the decade. Although the amendment doesn't specifically mention the estate tax, Baucus talked about making the 2009 estate tax rules permanent during a discussion of the amendment on the Senate floor. The budget spending outline itself, which sets a framework for lawmakers to follow during budget negotiations later this year, then passed by a 52-47 vote.

Significantly, the Senate also rejected several other estate tax proposals that would have exempted even wealthier estates. Members of the Senate voted 51-48 against an amendment offered by Sen. John Kyl (R-AZ) that was similar to the proposal that came up short in the prior Republican-controlled Congress. Senators also rejected an amendment by Sen. Jim DeMint (R-SC) that would have repealed the estate tax completely in 2010, and voted 74-25 against an amendment by Sens. Ben Nelson (D-NB), Blanche Lincoln (D-AR), and Mary Landrieu (D-LA) that would have increased the exemption to $5 million and lowered the top tax rate to 35 percent, but would also have subjected the tax cut to "pay-as-you-go" rules, which require that Congress pay for any added initiatives or tax cuts with offsetting savings or tax increases.

The overall budget resolution also rejected cuts in Medicare and Medicaid spending that President Bush and some Republican lawmakers have proposed.

The House of Representatives also passed its own Democratic budget blueprint, which assumes that the tax cuts enacted during Bush's first term, including the estate tax, will expire, generating a huge surplus in 2012. One of the most important features of the House budget plan is its "pay-as-you-go" requirement. As with the Senate resolution, the House resolution does not include a Bush proposal to reduce funds for Medicare and Medicaid.

The future of the Bush tax cuts will likely be decided after the 2008 presidential election.

For an earlier article on efforts to alter the estate tax, click here.

For more on estate taxation, click here.

Local Elder Law Attorneys in Ashburn, VA

Mindy Felinton

Felinton Elder Law & Estate Planning Centers
Rockville, MD

Evan Farr

The Law Firm of Evan H. Farr, P.C.
Fairfax, VA

Ron Landsman

Ron M. Landsman, P.A.
Rockville, MD

Last Modified: 03/29/2007

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