US Senate Centrists Ponder Gradual Estate Tax Reduction
By Martin Vaughan, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- A bipartisan group of senators who favor lowering
estate taxes are studying a proposal to gradually reduce the tax until it
reaches 35% in 2019.
The senators, led by Sens. Jon Kyl (R., Ariz.), and Blanche Lincoln (D., Ark.)
, have long sought to cut the tax from its current level of 45%, and exempt more
small businesses and estates from the tax.
But congressional pay-as-you-go budgeting rules and a crowded Senate schedule
have led them to consider staking their hopes on a gradual reduction of the tax,
Senate aides said.
A House bill introduced last month by Reps. Shelley Berkley (D., Nev.) and
Kevin Brady (R., Texas), last month provides the template for what a phase-down
of the tax might look like. The current rate of 45% would be reduced by one
percentage point per year, and the exemption of $3.5 million would increase by $
150,000 per year. In 2019, the rate would be fixed at 35% and the exemption
amount at $5 million.
House Ways and Means Chairman Charles Rangel (D., N.Y.) favors extending the
2009 estate tax policy permanently. The House is likely to pass within the next
few weeks legislation that either permanently extends 2009 law, or does so for
one year only.
Business groups including the National Federation of Independent Business and
the National Association of Manufacturers are slated to meet Tuesday to discuss
end-of-year strategy on estate tax legislation.
Kyl and Lincoln won 51 Senate votes in April, including 10 Democrats, for an
amendment to the Senate budget blueprint that embraced a 35% estate tax rate and
a $5 million exemption level. But ultimately the budget stipulated that any
estate tax policy that is more generous than the 45% and $3.5 million exemption
in current policy must be offset by other tax increases or spending cuts.
That means Kyl and Lincoln face an initial hurdle of finding offsets for some
$87 billion their amendment would cost over the next 10 years.
Using a gradual phase-out instead reduces that cost to just under $47 billion,
said one person with knowledge of discussions--still no small amount of revenue
that would require offsets.
Democrats are eager to enact some estate tax bill this year to prevent a
scheduled, one-year repeal of the tax in 2010. Republicans and red-state
Democrats, like Lincoln and Sen. Ben Nelson (D., Neb.) are just as determined
that Congress not reverse the repeal without enacting a permanent fix that is
more favorable to family business owners and the wealthy than current law.
"Everyone is highly motivated to reach some sort of solution," said one Senate
GOP aide.
Working against proponents of lowering the estate tax is the fact that the
Senate is almost exclusively focused on health-care legislation, with very
little Senate floor time available for much of anything else through the end of
this year.
Senate Finance Committee aides, in a closed-door meeting earlier this week,
discussed combining estate tax legislation with a bill renewing expiring
business tax breaks like the R&D credit and legislation renewing expiring trade
preferences.
The combination with the popular business tax extenders might make it tougher
for Republicans and centrist Democrats to vote against an estate tax policy they
didn't like.
-By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@
dowjones.com
(END) Dow Jones Newswires
11-13-091535ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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