The Senate failed to approve full estate tax repeal. Thursday the House approved a lower exemption limit in hopes of lowering the price tag for Senate conservatives.
Two weeks ago the Senate failed to gain the needed 60 votes for a cloture on full estate tax repeal. The new House bill, approved by a 238-188 vote, increase the exemption amount to $5 million per person (indexed for inflation).
Introduced by House Ways and Means Committee Chairman Bill Thomas, it also reduces the rate of tax on estates up to $25 million to the capital gains tax rate (currently 15%, set to increase to 20% in 2011 unless extended). The bill would reduce the rate of tax on estates of $25 million or more to twice the capital gains rate (currently 30%, set to increase to 40% in 2011 unless extended).
The Permanent Estate Tax Relief Act of 2006 also maintains "stepped-up" basis for property acquired from a decedent by repealing the modified carryover basis rules that would have gone into effect in 2010.
This approach is expected to cost $283 billion over the next 10 years.
Exemption level may be too high
Iowa State University ag economist Roger McEowen says the action taken by the House shows full repeal is likely dead and he doubts the House will again try for a full repeal
McEowen suspects an exemption level at $5 million is too high for fiscal conservatives in the Senate. The question now remains how high legislators can push the exemption level without losing so many votes in the Senate, he says. In the end McEowen sees them settling in between the $3.5 to $5 million level. "Five million is on the upper end. We'll see if the Senate brings it back down a bit from there," he says.
Senate may vote next week
The Senate may attempt to take up this version or a similar version prior to leaving for its Fourth of July recess Friday, June 30. Any changes made by the Senate would send the bill to conference.
In floor comments on the bill, Thomas says the House will not support any further changes in the bill. "This is not a first offer. It is the only offer to the majority leader's request the chairman intends to offer," he says.