The Senate took several votes on the estate tax during the week of March 19 that a top insurance trade group official said “would represent a step in the right direction toward a reasonable resolution of this issue.”
The votes signaled an approach away from the total repeal of the estate tax supported by many Republicans and the Bush administration in prior Congresses.
Virtually unanimously, life insurance industry underwriting and agent groups support reform, not repeal, of the estate tax.
David Stertzer, CEO of the Association for Advanced Life Underwriting, Washington, D.C., said, “The series of votes during the budget debate last week clearly illustrate a desire for certainty on the estate tax issue, and further solidified that the support for full estate tax repeal in the Senate has eroded considerably given the current fiscal environment.”
Stertzer said Sen. Kent Conrad, D-N.D., chairman of the Budget Committee, was a key player in the effort to shepherd passage of an amendment that passed with the support of 97 senators and included a provision “that proposes fiscally responsible and sound estate tax policy.”
Michael Kerley, senior vice president, federal government relations for the , said the votes illustrate the “sustainable” part of the estate tax equation.
“Regardless of a person’s philosophical position on the estate tax, it does no good to call for the complete repeal of the estate tax if Congress is unwilling to reduce spending or increase taxes in the amount necessary to make up for the revenue loss caused by repealing the estate tax,” Kerley said. “At this point in time, it is clear that Congress is not willing to do either.”
He said NAIFA has always supported what “we call ‘reasonable and sustainable’ estate tax reform.”
For NAIFA, Kerley said, “reasonable” reform would peg the exempt amount at $2.5 million to $3.5 million per person. If the exempt amount were set at that level, about 99.6% of all people would be exempted from potential estate tax liability.
Jana Barresi, director, policy and public Affairs at the AALU, said, “The amendment that passed 97-1 was introduced by Sen. Max Baucus, D-Mont., and proposed extending “middle class” tax cuts and “freezing” the estate tax levels slated to be in place in 2009–$3.5 million exemption and 45% rate–through 2012.
“From our perspective, this would represent a step in the right direction toward a reasonable resolution on this issue,” she said.
Barresi said there were “other dynamics on other estate tax votes as well,” and a proposal suggesting a $5 million exemption and 35% rate came within just a few votes of passing.
“If the House and Senate agree on a budget resolution that retains the Baucus amendment, while the budget doesn’t have the force of law, it could set parameters for consideration of estate tax legislation later this year,” Barresi said.
According to officials at United for a Fair Economy, a lobbying group that supports moderate reform of the estate tax, votes during the Senate debate on the 2008 budget resolution indicated that:
–Nine senators took new positions on the estate tax. Increased numbers ofRepublican and Democratic senators support reform rather than repeal.
–A majority of senators support reducing the estate tax only if it doesn’t increase the budget deficit.
–All the newly elected Democratic senators opposed ending the estate tax,and all opposed reducing it if the change would add to the deficit.
The critical vote on the Baucus amendment was March 21.
Under current law, the top estate tax rate will be 45% in 2009, and the exemption will be $3.5 million per person. But the estate tax is supposed to spring back to pre-2001 levels after 2010, when the estate tax provision in Economic Growth and Tax Relief Reconciliation Act of 2001 expires.
In the past, life insurance groups have supported estate tax proposals using the 2009 estate tax figures.
Baucus attached the amendment to the 5-year budget resolution, a document that is supposed to guide Congress when it starts budget negotiations later this year.
The Senate finally passed the budget resolution on March 23 by a 52-47 vote.
Senators rejected several other budget resolution estate tax amendments.
Senators voted 51-48 against Amendment Number 583, offered by Sen. John Kyl, R-Ariz., which would have increased the exemption on estates to $5 million per person, indexed for inflation, and set the top death tax rate at no more than 35% beginning in 2010.
Senators voted 55-44 against Amendment Number 578, offered by Sen. Jim DeMint, R-S.C., that would have repealed the estate tax completely in 2010.
Senators voted 74-25 against Amendment Number 626, offered by Sens. Ben Nelson, D-Neb., Blanche Lincoln, D-Ark., and Mary Landrieu, D-La., that would have lowered the top effective tax rate to 35% and increased the exemption to $5 million. But that proposal also would have been subject to the Senate’s pay-go rules.
NAIFA’s Kerley cautioned: “Last week’s votes are not binding on future Congresses. At any time in the future, Congress can re-address the issue and reverse last week’s votes. You can be almost certain that we have not seen the last Congressional debate on the estate tax.”