Senate Finance Committee Chairman Offers Permanent Estate Tax Reform as Budget Amendment
Issue: Estate Tax
Date: March 11, 2008
Action Taken: The full Senate began debate this week on a proposed federal budget that the Senate’s Budget Committee passed last week. Senate Finance Committee Chairman Max Baucus (D-MT) today offered an amendment to the Senate Budget Resolution that provides permanent estate tax reform in the years 2010 and beyond — as apposed to complete repeal. The Baucus amendment would authorize future tax legislation to set estate tax rules at the level they are currently scheduled to be in 2009. If ultimately adopted, the individual exemption would be set at $3.5 — $7 million for a married couple. The top estate tax rate would be set at 45 percent.
Background: The Congressional Budget will determine the rules by which tax legislation will be considered by the Congress later this year. Thus, inclusion in the budget of authority to set the estate tax top rate at 45 percent and the personal exemption at $3.5 million would make it much more possible (although by no means certain) that legislation establishing those rules could be enacted this year. Many roadblocks to enactment of this type of legislation remain, but budget authority to do so removes one very significant hurdle.
The Baucus amendment would “pay for” estate tax reform by using a projected surplus that the budget anticipates in future years. That projected surplus is widely viewed as an “accounting gimmick” that will have little or no impact on the debate on the actual estate tax bill if it develops later this year. But it is enough to allow Senators to support the Baucus amendment now and still argue that they are not supporting anything that would add to the federal deficit.
Next Steps: The Senate will vote on this amendment to the budget proposal later this week. Most insiders think the Baucus amendment will pass, although on a mostly or purely party-line vote.
Later this week, the House is expected to vote on its version of a budget — probably Thursday, March 14. The House budget does not include authority for an estate tax reform bill. Most insiders do not believe such authority will be added to the House budget proposal during the House debate.
On Friday, the Congress recesses for a two-week in-state/in-district work period. Upon their return April 1, the House and Senate will begin negotiating the differences between their separate budget resolutions.
Insider News: In his remarks to the Senate, Senator Baucus indicated he intends to revisit the estate tax issue later this year. Leading up to that, the Finance Committee will hold a hearing on the estate tax March 12. (A report on the hearing will be in an upcoming issue of GovTalk.) Sen. Baucus indicated he intends to "at least" fashion legislation that would set the personal exemption at $5 million — $10 million for a married couple — and a top tax rate at 35 percent. However, the revenue needed to offset such an estate tax reform plan could prove prohibitive, particularly without budget authority to do so. But the NAIFA Government Affairs Department does expect considerable debate about the estate tax this year, even if final action on a reform proposal waits until next year (or possibly even the year after).
NAIFA Staff Contact: For additional information on this issue, please contact Michael L. Kerley at Mkerley@naifa.org or Danea M. Kehoe, Outside NAIFA Counsel, at DaniKehoe@aol.com.
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