Finally, some progress in providing certainty to the uncertain estate tax law. On December 3, the House passed a bill to make permanent a $3.5 million exemption amount. Absent new law passed by this Congress, the estate tax will disappear in 2010 only to return with a vengeance in 2011 with a relatively small $1 million exemption amount.
Interestingly, the House Bill was passed despite opposition from both the most conservative and liberal members: conservatives who believe the estate tax should be repealed because a 45% tax rate on estates above $3.5 million ($7 million for a married couple) is confiscatory, and liberals who believe the "rich" should be paying more. Thus, many House Members who do not believe $3.5 is the perfect amount nevertheless saw the Bill as the best compromise to address a looming problem. As Ways and Means Chairman Charles Rangel said, the Bill is the "best possible arrangement so people will know what to expect as it relates to the estate tax."
However, it is still uncertain whether the Bill will become law, with the Senate having a full plate over the next couple of weeks before adjournment. Even assuming the Senate addresses the legislation, it will again be examined by those Senators wanting greater protection from estate tax and those wanting even a lower exemption amount. Notwithstanding, most expect the House Bill to become law. Other possibilities include an exemption amount as high as $5 million, lower tax rates than 45%, and perhaps an exemption amount indexed for inflation.
We should at least know soon.
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