Today's taxes aren't too bad
Welcome recognition

A 'responsible' estate tax

Five Senators say their proposal to reinstate the estate tax for the "richest of the rich" is a fair and responsible way to deal with the expired statue.

S. 3533 would affect only the top 3/10 of 1 percent of taxpayers, says bill sponsor Sen. Bernie Sanders (I-Vt.). "99.7 percent of American people would not pay any estate tax whatsoever. It is geared toward the richest of the rich."

Joining in introducing what they have dubbed the Responsible Estate Estate Tax Act are Democratic Senators Tom Harkin of Iowa, Sherrod Brown of Ohio, Al Franken of Minnesota and Sheldon Whitehouse of Rhode Island. Their bill would:

  • Exempt the first $3.5 million of an estate from federal taxation ($7 million for couples). This is the same level that was in effect in 2009.
  • Include a progressive rate structure. For estates valued at more than $3.5 million and less than $10 million, the tax would be 45 percent, again the same as the 2009 level. The rate on the value of estates above $10 million and below $50 million would be 50 percent. The rate on the value of estates worth more than $50 million would be 55 percent.
  • Include a billionaire's surtax of 10 percent. 

For family farms that might face the estate tax next year, a popular argument against any estate tax collection, Sanders' bill would allow them to lower the value of their farmland by up to $3 million for purposes of the tax. Under current law, the value of farmland can be reduced up to $1 million when calculating estate tax liability.

Dueling estate tax bills: Given the general antipathy toward government giveaways to special groups, Sanders and his fellow sponsors' description of the current no estate tax situation as a bailout for the wealthy might help him get some support.

Sanders says his bill will bring in at least $264 billion over 10 years to help lower the deficit.

And the Vermont Independent, calling the estate tax "a good Republican idea" first introduced a century ago by GOP President Theodore Roosevelt, is hopeful some of his current colleagues who sit across the political aisle will join in supporting S. 3533.

That prospect, however, is complicate by the fact that a separate estate tax compromise is being worked on Senators Jon Kyl (R-Ariz.) and Blanche Lincoln (D-Ark.). Both serve on the Senate Finance Committee, which will also be the panel that takes the first look at the Sanders proposal.

The Kyl-Lincoln measure reportedly will have a 35 percent top estate tax rate and an exemption for estates valued at less than $5 million ($10 million for couples), more generous than the Sanders bill. They also are said to be considering a possible prepayment of estate tax liabilities at a lower rate.

While the Kyl-Lincoln proposal is, according to reports, "essentially written," the lawmakers are tweaking the revenue portions of the measure. Under current law, the 2009 estate tax levels can be extended for two years without pay-go money, but lost revenue after that must be offset.

And some worry that Sanders' bill, with its billionaire surtax, "could well start a wave of relocations to low-tax countries by people who often have homes abroad already."  

One way or the other, though, if Congress doesn't act by the end of 2010, the estate tax will return next year at a 55 percent top rate and a $1 million exemption level.

Related posts:

Want to tell your friends about this blog post? Click the Tweet This or Digg This buttons below or use the Share This icon to spread the word via e-mail, Facebook and other popular applications. Thanks!


Feed You can follow this conversation by subscribing to the comment feed for this post.

The comments to this entry are closed.