House Prepares for Action Affecting Estate Taxes
On August 1, it was another busy day in Washington as Congress aimed to finish business (for now) on key items, including House consideration of an extension of current income, capital gains, dividend and estate tax parameters.
House Action Today – The House was slated to begin consideration of the Republican one-year tax extension bill (HR 8), which would extend current rates for all taxpayers and preserve the current 35% estate tax rate and $5.12 million indexed exemption through 2013. Democrats planned to offer the Senate-passed bill as an alternative, which would extend current rates for individuals earning under $200,000 (couples under $250,000) and make no changes related to estate taxes. Due to its silence, the bill assumes a reversion to a 55% rate and $1 million exemption, although Democrats have indicated that they want to deal with estate taxes separately.
House Democrats – On Monday, Congressman Sander Levin (D-MI), the Ranking Member on the House Ways & Means Committee, introduced legislation (HR 16) to reinstate the 45% rate and $3.5 million exemption in 2013. The bill is expected to have a one-year duration. Levin also introduced the House companion to the Senate-passed tax bill (HR 15) that, as referenced earlier, was expected to be offered as an alternative to the GOP measure. As one indicator of less Democratic enthusiasm for the party’s positioning on estate taxes than on income taxes, the estate tax bill has only 14 original cosponsors, while the income tax bill has 37.
Senate Democrats – While Senate Democratic leaders continue to press for a return to a 45% rate and $3.5 million exemption, the voice of Senate Democrats who support preserving 35/5 is getting louder. On July 25, Senator Claire McCaskill (D-MO) introduced a bill (S 3440) to extend the current parameters through 2013. Senators Mark Pryor (D-AR) and Jon Tester (D-MT) signed on as original cosponsors.
House Letter – Following last week’s joint letter to the Senate, Policy and Taxation Group cosigned a letter to the House this week with our allies on the Family Business Estate Tax Coalition (FBETC) calling for congressional action to avoid a massive increase in the estate tax burden and ensure the maximum sustainable relief is achieved this year. The letter can be found here.
Brady Study – As previously mentioned, Congressman Kevin Brady (R-TX), who is the sponsor of the death tax repeal bill in the House (HR 1259) and serves as Vice Chairman of the Joint Economic Committee, has unveiled a recent study on the “Cost and Consequences of the Federal Estate Tax”. Among the study’s findings are that the estate tax hinders economic growth by undermining savings and capital accumulation, decreases America’s capital stock, endangers family businesses that lack the liquid assets to pay the tax, reduces income and wealth mobility, creates economic inefficiencies and unnecessary costs for businesses and raises little revenue. These are arguments are certain to be a part of the debate as the push continues.