Senate Approves Baucus Estate Tax Budget Amendment
Senators Reject More Expensive Kyl, Salazar Estate Tax Amendments
Issue: Estate Tax
Date: March 13, 2008
Action Taken: The Senate today overwhelmingly approved an amendment to its version of a Congressional budget that would authorize tax legislation to permanently reform the estate tax at a $3.5 million/individual ($7 million for a married couple) exemption and a 45 percent top rate. The vote was 99 to 1. Senators rejected two other estate tax amendments--each crafted slightly differently, but both with $5 million/individual ($10 million married) exemptions and a 35 percent top rate. One of the amendments (the Salazar amendment) failed by a vote of 38 to 62. The other (the Kyl amendment) went down on a 50 to 50 tie vote.
The budget authority to craft estate tax rules that set the exemption from estate tax liability at $3.5 million a person, and the top estate tax rate at 45 percent, was part of a larger tax amendment offered by Senate Finance Committee chairman Senator Max Baucus (D-MT). The amendments that set the exemption amount at $5 million/person and the top rate at 35 percent were offered by Senators Ken Salazar (D-CO) and Jon Kyl (R-AZ), both members of the tax-writing Finance Committee.
Background: The Congressional budget will determine the rules by which tax legislation will be considered by the Congress later this year. However, the budget is not binding and it is not law.
Thus, inclusion in the budget of authority for a tax bill that sets the top estate tax rate at 45 percent and the personal exemption at $3.5 million establishes a sense of what the Senate thinks it would approve (particularly in light of the 99 to 1 vote by which it passed). But it does not guarantee it will be enacted into law. Failure to approve the higher exemption/lower top rate proposals by Senators Salazar (a Democrat) and Kyl (a Republican) reflects the partisanship of the issue (the Kyl amendment failed on a tie vote; an almost identical amendment offered by Senator Salazar, however, failed by a 38 to 62 vote.). It also suggests that the Senate does not think it can muster the votes to go beyond the $3.5 million/45 percent top rate contained in the Baucus amendment. Of course, time will tell. The only votes that will really count in connection with reforming the estate tax are the ones on the actual bill (if there is one) that goes to the Senate floor, probably this fall or perhaps even not until next year.
Next Steps: The Senate and House will have to reconcile their differing versions of the budget, and then approve that final version. That effort will begin in April, after the two-week spring recess. Key will be whether the final budget contains "reconciliation instructions" for a tax bill. (The House budget does contain reconciliation instructions; the Senate budget does not.) A reconciliation bill is mandatory, and enjoys procedural protections that prevent a Senate filibuster and thus allows enactment by a simple majority in the Senate. Without reconciliation, however, any tax bill--even one authorized in the budget--will have to win at least 60 votes to get through the Senate. And a tax bill that is authorized, but not required (via reconciliation instructions) may or may not be written by the tax writing committees and/or come to the House and Senate floors for a vote.
Insider News: The estate tax is a knotty issue that is at the same time both partisan and crosses party lines. Lawmakers in both parties and on both sides of the Capitol want to at least reform the estate tax, and no one wants current law to remain in place. (Current law allows one year of repeal in 2010 and then in 2011 returns estate tax rules to a 55 percent top rate and a $1 million exemption.) However, revenue considerations, and the fact that the issue is widely viewed as a GOP priority, will make enactment of permanent estate tax reform very difficult this year. Attempts to solve the estate tax problem this year--and serious ones that could succeed--are virtually certain. But the odds are that the issue will spill over into 2009.
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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