The Senate yesterday voted nonbinding approval for a provision that would reform rather than repeal the estate tax and freeze its rate at the level set to go into effect in 2009.
The amendment, introduced by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, if enacted would leave the estate tax at the 2009 level with a $3.5 million individual exemption and a 45 percent maximum rate above that, indexed for inflation.
Estate taxation has been a point of deep concern to independent insurance agents, who have complained that estate taxes threaten their ability to leave assets to their heirs because agency assets are mostly illiquid.
With its vote the Senate appeared to be taking a middle road on the estate tax.
A second amendment, that was unsuccessful during floor debate on the budget resolution, would have set aside a reserve fund that would allow the estate tax law to increase to a $5 million exemption with a 35 percent rate.
This amendment was filed by Sen. Ken Salazar, D-Colo. This amendment is favored by several senators, including Sen. Blanche Lincoln, D-Ark., who do not think that freezing the tax at the 2009 level sufficiently addresses the estate tax concerns of illiquid family farms and small businesses.
The final favorable vote on the estate tax was even more important because another amendment supported overwhelmingly by Republicans that would have been even more liberal failed on a 50-50 tie vote.
The favorable vote on the Baucus amendment came in a nonbinding budget resolution.
It supported the views of industry lobbyists that a consensus appears to be emerging in Congress to reform rather than repeal the estate tax going forward–and to act before 2010, when the estate tax goes to zero before returning to 2001 levels in 2011.
Under the 2001 law that governs the estate tax, the tax goes away in 2010 but re-emerges in 2011 with a $1 million individual exemption and a 55 percent tax rate.
Larry Raymond, president of the Association for Advanced Life Underwriting, said after the vote, "It is clear from events this week that, even with a large number of competing priorities, the Senate continues to focus time on estate tax reform."
David Stertzer, AALU chief executive officer, added that while the budget resolution process is significant, it merely provides the fiscal guidelines for Congress to follow throughout the year.
"It does not have the force of law and any policies recommended during the resolution debate must be enacted through tax legislation," Mr. Stertzer explained.
The Baucus amendment passed 99-1.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.