Senators Blanche Lincoln (D-Arkansas) and Jon Kyl (R-Arizona) introduced July 14 a proposal to permanently reform the federal estate tax. The proposal would require the Senate Finance Committee to amend H.R. 5297, the Small Business Lending Fund Act of 2010, to permanently set the estate tax rate at 35%, with a $5 million exemption amount phased in over 10 years and indexed for inflation. It would also provide a “stepped up basis” for inherited assets.
The Lincoln-Kyl proposal also instructs the Senate Finance Committee to offset the difference in revenue loss between the Obama Administration’s proposed 45% estate tax rate with a $3.5 million exemption amount and their proposed reform. The estate tax temporarily expired this year, but if Congress does not act this year, the federal estate tax is scheduled to jump to 55% with only a $1 million exemption at the beginning of 2011.