The Senate reiterated on May 9 its approval for a degree of estate tax reform going forward that the insurance industry can support.
The Senate voted 51-44 to retain language in the budget resolution it passed March 23 that established the current-law 2009 estate tax rules: a $3.5 million-per-person exemption and a top tax rate of 45%, extending through 2012.
The vote dealt with the 5-year budget resolution that guides appropriating committees. While not binding, it allows appropriations bills that follow the guidelines to pass the Senate later under majority votes rather than the 60 votes needed under regular order.
The May 9 action was triggered by the House’s decision the day before to name conferees to negotiate a final budget resolution with conferees from the Senate.
The legislation then goes back to each house of Congress for another vote.
The May 9 vote was the result of an effort by Republicans to “instruct” conferees who will negotiate the budget blueprint for the next 5 years with the House to revise the language agreed upon in March.
The voting, done at the request of Sen. John Kyl, R-Ariz., chairman of the Senate Republican Conference, was designed to signal to core supporters that it continued to support the Bush administration program of low taxes, especially low estate tax rates.
The Kyl “instruction” on estate tax would have provided permanent estate tax relief with a top marginal rate of no higher than 35%, a lower rate for smaller estates, and a $5 million exemption. That “instruction” passed the Senate 59-41.
But then, in a vote immediately following a motion by Sen. Kent Conrad, D-N.D., a member of the Senate Finance Committee, conferees were instructed to support the March language in the budget language dealing with the estate tax, effectively negating the vote on the Kyl amendment.
Jana Barresi, director of policy and public affairs for the Association for Advanced Life Underwriting, said the trade group has consistently supported reasonable reform that will allow those subject to the estate tax to plan with certainty.
She said the outcome of the Kyl vote on the “motion to instruct” budget conferees “isn’t really anything new; we know there are some moderate Democrats who support a lower rate, but the reality is that the motion to instruct conferees doesn’t obligate the conferees to follow that suggestion, and the Baucus amendment passed in March stands as the Senate position in conference.”
In a subsequent motion to instruct conferees, the Senate reaffirmed by a vote of 51-44 its support for the existing Senate position on extension of tax cuts. The budget resolution doesn’t have the force of la–it sets fiscal guidelines for Congress to follow throughout the year–so any changes to tax law would have to be made through legislation, and any tax cuts that aren’t paid with offsets will be subject to 60 votes.
Barresi said AALU estimates that it costs $10 billion over 10 years for every 1% drop in the estate tax rate.
“In essence, the difference between a 35% rate and a 45% rate is $100 billion of lost revenue over 10 years,” she said. “In the pay-go environment, this is a significant amount of revenue.”