Wednesday, April 01, 2009

 

Senate estate tax amendment is harmful

We have received word that Senators Lincoln and Kyl are planning to offer an amendment to the budget resolution in support of reducing the estate tax below the 2009 parameters with an unspecified funding offset.

We urge Ohio's Senators to oppose the Lincoln-Kyl amendment and any other amendment that would extend estate tax relief beyond the current 2009 law. Under current law, the estate tax will be fully repealed next year, only to revert to pre-2001 levels in 2011. Because of these provisions, Congress will have to consider the issue before the end of this year. This amendment forces a test vote on the estate tax – and will establish a precedent for the estate tax reform policy that could influence debate on actual estate tax legislation sometime in the next 12 months.

The Senate budget resolution assumes the President’s proposal to retain the 2009 parameters, which exempts up to $3.5 million for individuals, and $7 million (indexed) for couples from any estate tax. The rate would be 45 percent but the effective rate for most estates would be much lower because of other exemptions already in law.

The Lincoln - Kyl amendment would create a deficit-neutral reserve fund allow the estate tax exemption to be increased to $10 million per couple and $5 million per individual with a 35 percent rate.

Retaining the 2009 parameters as the budget resolution provides is already very generous – it costs $485 billion from 2012-2021 (the 10-year period it would be fully in effect). Increasing the exemption for individuals to $5 million and for couples to $10 million while reducing the rate to 35 percent costs an additional $245 billion for a total cost of $730 billion over the same period.

If offsets are available, they should be used to finance higher priorities like health care reform, Social Security reform, improving education, or reducing the deficit rather than for tax cuts that only help those with estates valued at more than $7 million per couple. Surely it would be unseemly now to cut the estate tax below its current levels with the economy in turmoil and millions of people are losing their jobs or otherwise struggling in the aftermath.

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