Insurance agents and brokers willbe among those most impacted by an increase in estate-tax liabilityif Congress is unable to bridge the ideological divide on extendingthe Bush-era tax cuts.

Charles Symington, senior vice president of government affairsfor the Independent Insurance Agents and Brokers of America(IIABA), says allowing estate-tax rates to revert to theClinton-era levels would be “punitive” to producers and would have“a staggeringly negative effect on our membership.”

If the tax cuts expire at the end of the year, income-tax ratesfor the highest-earning individuals and families will rise from 36percent to 39 percent, says Andrew Katzenstein, a partner in thepersonal-planning department of global law firm Proskauer’s LosAngeles office. But if the estate-tax provisions are allowed toexpire, there will be an 80 percent drop in the exemption and a 20point increase in the tax rate.

The estate-tax provisions of the Bush tax cuts, as amended inlate 2010 for 2011 and 2012, establish a $5 million exemption and amaximum 35 percent tax rate.

If the tax cuts are allowed to expire, the estate tax willspring back to 2001 levels, with a $1 million personal exemptionand a 55 percent top tax rate.

“When compared to all the changes in rates that will occur, boththe percentage of change and the gross-percentage increase aredramatically more [for estate taxes] than virtually every otherchange” that would occur if the tax cuts expire, Katzensteinsays.

Symington explains that most agencies and brokerages are smallbusinesses, organized as pass-through entities such asS-corporations, partnerships and sole proprietorships.

That means they pay taxes at individual rates, he says. “Inaddition, many of our small business members are family-owned,” headds.

He says allowing current estate-tax law to expire would meanthat in many cases a family business would have to be liquidated inorder to pay the government.

“This translates to lost jobs in a time when our economy canleast afford it,” Symington adds.