Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) are leading a fight in the Senate to implement a cut in the estate tax that would lower the rate from 45 percent to 35 percent and bump the exemption (the amount to which the tax does not apply) from $3.5 million to $5 million ($10 million for a couple). Thanks to a Bush-era accounting gimmick, the estate tax is set to disappear in 2010, and come back with a much lower exemption and higher rate in 2011, thus necessitating Congressional action.
As we’ve noted here before, the Lincoln-Kyl plan constitutes a $250 billion giveaway to the rich. And not to be outdone in terms of bad bi-partisan proposals, the House now has it’s own version of the Lincoln-Kyl “compromise,” introduced by four members:
The stakes were raised today in the House, when Reps. Shelley Berkley, D-Nev., Artur Davis, D-Ala., Kevin Brady, R-Texas, and Devin Nunes, R-Calif., introduced legislation to set the rate at 35 percent going forward, with the exemption bumped up to $5 million from the current $3.5 million and indexed for inflation…Brady said it would exempt 99.8 percent of all estates from the “death tax,” calling it the “best option available today to preserve small businesses and family farms in America.”
As National Journal noted, the House measure “would be much more expensive than extending the 2009 rate.” For the record, under current law, 99.7 percent of households will be completely exempt from the tax. So by Brady’s own calculation, $250 billion will buy an exemption for .1 percent of households.
And as for looking to “preserve small businesses and family farms,” current law would only affect about 100 of them, and “all but a handful would have sufficient liquid assets on hand (such as bank accounts, stocks, and bonds) to pay the tax without having to touch the farm or business.” The House plan would drop that number to 40.
House Democratic leaders are pushing for a permanent extension of current law. But if there is wide disagreement, Congress may punt, install a one year extension, and revisit the issue before 2011. Can a better deal be worked out? I certainly hope so.