Senators Move to Revive Estate Tax at Reduced Rate

July 22, 2010

WASHINGTON – The federal estate tax would be revived, but at a reduced rate, under a plan being pushed by two senators, a Democrat and a Republican.

Democrat Blanche Lincoln of Arkansas and Republican Jon Kyl of Arizona hope to attach the new estate tax to a small business lending bill pending in the Senate. Their bill would set the top estate tax rate at 35 percent, with a per-person exemption of $5 million, indexed to inflation.

In 2009, the top estate tax rate was 45 percent with a per-person exemption of $3.5 million. Congress allowed the estate tax to expire this year, but it is scheduled to come back next year with a top rate of 55 percent, unless Congress acts.

“It’s time to take decisive action on the estate tax, and provide the permanent solution that Arkansas’ hardworking farmers and small businesses are desperately seeking,” Lincoln said.

The Senate, as part of a nonbinding budget resolution, voted last year in favor of a proposal similar to the one pushed by Lincoln and Kyl. The House, however, voted to extend the 2009 rates, and the two sides were unable to reach an agreement.

The Senate is expected to take up the small business lending bill next week, though leaders have not indicated whether they will allow a vote on the estate tax as part of the debate.

“If the Small Business Lending bill is intended to help small business create jobs, wouldn’t it make sense to provide small business owners with the certainty that their tax rates aren’t going to skyrocket at the beginning of next year?” Kyl said.