Federal legislation will give a $250 billion tax cut to wealthy estates
Last week during floor debate of the budget resolution, the U.S. Senate narrowly approved a $250 billion reduction in the federal estate tax. While not binding, the vote could set a precedent for the direction that estate tax legislation will take in Congress later this year.
The tax cut came in the form of an amendment to the budget resolution. It was proposed by Senators Lincoln (D, AR) and Kyl (R, AZ) and passed by a 51-48 margin. Washington Senators Patty Murray and Maria Cantwell joined ten other Democrats and Senate Republicans in approving the measure.
Current federal estate tax law allows a $3.5 million exemption for individuals and $7million for couples with a flat tax rate of 45 percent (although the average effective rate is much lower at 16.5 percent*). At this level, only three in every one thousand estates owe federal taxes. President Obama and the House of Representatives both called for freezing the estate tax at 2009 levels in their budget proposals.
The Lincoln-Kyl amendment increases the estate tax exemption to $10 million per couple and $5 million per individual with a lower rate of 35 percent. Over ten years, it would result in $250 billion in lost revenue for the federal government.
*Source: Tax Policy Center
