Congress most likely will extend 2009 estate tax rates for one year as it continues to seek consensus for comprehensive estate tax reform, according to industry officials.
The issue is critical because under current law, estate taxes will expire for 2010, at a huge cost in government revenues, returning to 2001 levels in 2011.
Under current law, the 2011 exemption would be $1 million per person, with a 55% maximum tax rate. For 2009, the estate tax levy carries a $3.5 million per-person exemption and a 45% tax maximum tax rate.
The consensus is that Congress will ultimately decide to retain the 2009 levels as the base for permanent tax reform, indexed for inflation.
But the precise language remains to be negotiated.
In fact, the House is considering passing a so-called “one year patch” when it returns in September, according to Sarah Spear, director of policy and public affairs at the Association for Advanced Life Underwriting.
“It is a completely different story in the Senate,” Spear said. “Senators want permanent reform, but may not have the time to get to it.”
That’s because details of permanent estate tax reform “still need to be ironed out because of the constituency that is pushing for higher exemption and lower rates” than most members believe is fiscally appropriate, Spear said.
AALU continues to advocate for the sound tax policy of reunification and portability as part of any permanent estate tax reform.
The 3 key bills dealing with estate tax reform include S. 722, introduced in the Senate in March by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.
The bill is a middle-class tax reform package that includes an estate tax proposal that would freeze the exclusion and rate at 2009 levels, reunify the estate and gift tax credit, allow for portability and index it for inflation. The bill’s co-sponsors are Sen. Charles Schumer, D-N.Y., and Sen. Jay Rockefeller, D-West Va.