An agreement between Senate Democrats and Republicans on an estate tax proposal has broken down, according to one of the lead negotiators, Senate Minority Whip Jon Kyl (R-AZ). Observers say that with each passing day, estate tax legislation that would apply retroactively appears less and less likely, while the probability grows of a return to a 55 percent rate and $1 million exemption beginning January 1, 2011.
“I don’t know what’s going to happen,” said Sen. Mary Landrieu (D-LA). “It just doesn’t seem like there’s enough votes to do anything.”
Although details of the short-lived deal have not been made public, The Hill reports that lawmakers were looking at a tax levy of 35 percent for those worth more than $3.5 million, with the exemption ultimately increasing over time to $5 million with no index for inflation. Taxpayers would reportedly have been given the option of prepaying their estate tax, with prepayment trusts paying a lower rate.
Kyl said the deal broke down because of Senate Democrats’ unwillingness to allow any legislation to reach the floor that lacked the support of a majority of its members.
“We no longer have an agreement because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they’re not going to allow it on the floor, at least not voluntarily,” Kyle said. “So we have to find a way to get a reasonable permanent estate tax reform to the floor where members can vote on it.”
This happening anytime soon seems unlikely, with GOP members holding firm for a $5 million exemption with a 35 percent tax rate, while “80 percent” of Senate Democrats oppose this plan, according to Sen. Bob Casey (D-PA).
“I think we’re not yet at the point where we’re drawing lines, but the idea that we’re going to give an incredible economic advantage to less than 1 percent of our taxpaying population is really offensive to me, to understate it dramatically,” Casey said. “Most of our caucus is very concerned about what will happen on the estate tax, and I think there are some who would probably be with Sen. Kyl, but I think it’s a small number.”
“My personal opinion remains that were not likely to see any estate tax legislation before the November elections, and that retroactive legislation is less likely with each passing day,” writes Matthew Crider of the Sacramento Estate Planning Examiner.