Phone: 630-495-2282 Fax: 630-495-2260 Map/Directions

Path forward for estate tax still being plotted

November 16, 2010

Congressional leaders are still discussing the path forward for estate tax legislation. But any delay could make a one-year extension of current law more likely, rather than a permanent resolution of the issue.

Such a move would be simpler to get through Congress, but it would frustrate business groups, which argue that short-term fixes would hurt estate planning by family-owned businesses.

Congress is under pressure to act by the end of the year. If it does nothing, current law will make the estate tax disappear on Jan. 1, only to return in 2011 at higher rates and lower exemptions.

Few lawmakers are eager to pass a retroactive bill that would tax people after they die and after their estates are already distributed.

But consensus on the issue has proven elusive, and the House Democratic Caucus is showing signs of a split. Members also are focusing more on job-creation legislation, which may take precedence over the estate tax.

Democratic leaders want to move a permanent extension of the 2009 structure of the estate tax, which features a $3.5 million per-person exemption and a top rate of 45 percent.

Liberals are upset that such an extension — which would cost $233.6 billion over 10 years and benefit the country’s wealthiest families — would not be offset,even as they have to scrape up every dollar they can to offset health care legislation.

Meanwhile, a moderate faction led by Rep. Shelley Berkley (D-Nev.) has offered a proposal that would be more favorable to estates. Berkley would gradually bring the top rate down to 35 percent, and push the exemption up to $5 million and index it for inflation.

Berkley’s legislation mirrors a plan supported by a bipartisan group of senators during the budget debate earlier this year. That amendment — offered by Sens. Blanche Lincoln (D-Ark.) and Jon Kyl  (R-Ariz.) — was adopted on a 51-48 vote, signaling that Republicans and moderate Democrats had the clout to get a better deal for estates than the 2009 rates.

Congress implemented the federal estate tax in 1916.