Estate Tax
Issue: The Senate passed two amendments to the Senate 2010 budget resolution, aimed at providing estate tax relief. Sens. Blanche Lincoln (D-Ark.) and Sen. Jon Kyl (R-Ariz.) were sponsors.
The amendment decreases the top tax rate that a person must pay on transfers of property at death to 35% and raises the values for individual exemption of the tax to $5 million, and the exemption for couples to $10 million. This means any estate worth less than $5/$10 million would be exempt from estate taxes, and those estates worth more would be taxed for the portion above $5/$10 million at a rate of 35%
Currently the top tax rate is 45% with an individual exemption of $3.5 million and couple exemption of $7 million. Under current rules, in 2011 these rates would have to revert back to pre-2001 levels of 55% tax rate and $1 million exemption. President Obama’s budget calls for keeping the rates at 2009 levels and an earlier amendment to this budget by Senator Max Baucus (D-Mont) supported retaining the current rates, but added indexing for inflation.
Immediately following passage of Lincoln/Kyl, Senator Durbin offered another amendment to create a budget point of order against any increased estate tax relief that does not also include equivalent tax relief for middle class taxpayers.
Passage of these amendments does not guarantee they will be made into law, but rather establishes a sense of what the Senate would approve. No one seems to support the current rule of reverting the estate tax back to pre-2001 levels, but there remains controversy on how to move forward.
Action: AMI will continue to watch this issue as it moves through the budget process and keep you informed.