Estate Tax Battle Returns to U.S. Senate

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To: NAIFA Members in the states of Arkansas, Louisiana, Maine, Ohio, Oregon and Washington
cc: NAIFA Members in all other states
From: David E. Smithkey, CLU, RFC, NAIFA President
Date: June 23, 2006
Subject: Estate Tax Battle Returns to U.S. Senate

The debate over the future of the estate tax has reverted back to the U.S. Senate. I must call upon you again to contact one or both of the Senators from your state listed below to ask them to support reasonable compromise reform legislation on the estate tax.

These Senators likely hold the key to the outcome:

Arkansas - Sen. Mark Pryor (D)
Louisiana - Sen. Mary Landrieu (D)
Maine - Sen. Olympia Snowe (R) and Sen. Susan Collins (R)
Ohio - Sen. George Voinovich (R)
Oregon – Sen. Ron Wyden (D)
Washington - Sen. Maria Cantwell (D) and Sen. Patty Murray (D)

Background

The House of Representatives passed an estate tax “reform” bill, H.R. 5638, yesterday by a vote of 269 to 156. The vote was never in doubt. The Senate could take up H.R. 5638 as early as next Tuesday. The Senate took up estate tax repeal on June 8, 2006, but was unable to muster the 60 votes to overcome a filibuster.

H.R. 5638, authored by Rep. Bill Thomas (R CA), was written specifically to attract support from the above list of Senators. The key features of H.R. 5638 are:

An exempt amount of $5 million for each individual ($10 million for a married couple).
The exempt amount would become effective in 2010 and indexed thereafter.
Taxable estates above $5 million and up to $25 million will face a top rate of the capital gains rate, currently set at 15%.
Taxable estates above $25 million will be subject to a top rate that is double the capital gains rate.
Currently the capital gains rate is 15%, but that rate sunsets in 2010 and would increase to 20% if Congress does not act.

Social philosophy aside, the element in the equation that troubles most Senators is the loss of future tax revenue in light of our county’s expanding nation debt. The cost of H.R. 5638 could be as high as 80% of the cost of full repeal. NAIFA and its allies have made the judgment that a reform proposal that costs no more than 50% of the price of full repeal can be sustained politically over a period of years. A new law reducing revenue by 80% creates a high likelihood that future members of Congress will constantly re-address the issues—creating great uncertainty among people who need to plan.

Telephone Action Alert-Directions

I’m asking that you call one or both of your state’s Senators from the above list. NAIFA’s ally, the Association for Advanced Life Underwriting (AALU), has volunteered to underwrite the cost of a telephone patch-through program. I urge you to take advantage of this opportunity. Nothing could be easier. Here’s how it works.

Call your Senators’ offices by dialing the patch-through number at 1-800-409-5179. You will be prompted to relay the following message:

It is clear that a long-term, sustainable resolution to the estate tax needs to be found.
Any proposal costing more than 50% the cost of repeal is likely to be unsustainable because of the many budgetary pressures faced by the nation. The reform proposal recently put forth in the House (H.R.5638) would reduce future revenue at a rate nearly 80% of the cost of full repeal.
The reform option most likely to provide sustainability is simply to extend 2009 law into the future. That would set an exempt amount of $3.5 million per individual.
The 2009 exemption level would exclude 997 out of every1000 estates from ANY tax.
Please support fiscally responsible estate tax reform that would exempt that vast majority of Americans from estate tax liability while allowing the remaining few subject to the tax to plan with certainty.

No one knows how the votes may shake out if the Senate takes up H.R. 5638 next week. What I do know is that we have an opportunity to have a say in the outcome. In a democracy that’s all we can ask.

Thanks again for your continued support and participation.
David E.

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