Update, on Recent Proposals

Representative Jim McDermott (D-WA) has proposed H.R.2023. This bill would set the estate tax exemption at $2 million per individual and $4 million per couple, indexed for inflation. The bill includes a graduated rate structure. Estates up to $5 million would be taxed at 45%, estates over $5 million would be taxed at 50%, and estates over $10 million would be taxed at 55%. This represents a middle ground between the 2009 and 2011 laws. The bill would raise $31 billion more in federal revenue over 10 years than the 2009 law, while improving the tax by indexing it for inflation and rebating money to the states for their state estate tax.

Senators Bernard Sanders (I-VT), Tom Harkin (D-IA), and Sheldon Whitehouse (D-RI) have proposed S.3533. This bill would set the estate tax exemption at $3.5 million per individual and $7 million per couple. The bill includes a graduated rate structure. Estates up to $10 million would be taxed at 45%, estates over $10 million would be taxed at 50%, estates over $50 million would be taxed at 55%, and estates over $500 million would be taxed at 65%. This also represents a middle ground-raising $62 billion more in federal revenue over ten years than 2009 law, while providing additional protection for farmers and open space.

Representative Linda Sanchez (D-CA) has proposed H.R.5746. This bill in the House of Representative contains the same language as the Sanders/Whitehouse/Harkin proposal.

President Barack Obama has proposed to make 2009 estate tax law permanent. This would set the exemption at $3.5 million per individual and $7 million per couple with a flat rate of 45%. The House of Representatives has passed a law in line with this, H.R.4154. This bill has yet to make it to the Senate.

Senators Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) have proposed to set the estate tax exemption at $5 million per individual and $10 million per couple indexed for inflation, along with a flat rate of 35%.

The Will Doctor does not see any meaningful chance of these being voted upon or passed by both houses of the legislature this year. We continue to expect some change along the lines of these proposals next year, but chances remain low that these will be made retroactive to 2010.

Posted in Status of Tax Legislation, WillPlan Blog.

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