A group that lobbies against the federal estate tax has launched an open attack on the life insurance industry.[@@]

The American Family Business Institute, Washington, has issued a statement through U.S. Newswire, a national press release distribution service, calling on the Senate to pass a full repeal of the estate tax.

In the statement, AFBI Executive Director Dick Patten criticizes insurance groups that are seeking only to increase federal estate tax exemption.

“The unfair death tax places an enormous burden on American families who get forced to take out huge life insurance policies in order to survive,” Patten says in the statement. “This is yet another hidden cost that the death tax lays at the doorstep of the American family and the American family business owner. We understand that the life insurance industry is trying to protect its financial interests, but we think the financial interests of the American people should come first.”

Life insurers generate about $12 billion in annual revenue by helping customers cope with the federal estate tax, the AFBI says.

The group says it has obtained an electronic mail message from the Association for Advanced Life Underwriting, Falls Church, Va., that asks AALU members to “communicate the association’s interests” to their senators.

The AALU is promoting an estate tax proposal that would increase the exemption level to $2.5 million per person, from $1.5 million today, and cut the top estate tax rate to 45%, from 47%.

The AALU proposal would eliminate the estate tax for 99.8% of decedents while costing the federal government only half as much as full repeal, according to Roger Sutton, president of the AALU.

Congress included a provision phasing out the federal estate tax in the Economic Growth and Tax Relief Reconciliation Act of 2001, but the provision is set to expire in 2011.

Unless Congress acts, the expiration of the provision will bring the estate tax back in 2011. The exemption will fall to $675,000, and the top rate will rise to 55%.

The House of Representatives voted in favor of full repeal of the federal estate tax in April, and President Bush has been a strong supporter of estate tax repeal.

The Senate is expected to vote on the issue shortly after returning from its August break.