Vermont independent Sen. Bernie Sanders and three Senate Democrats Thursday proposed an estate-tax plan that would hit wealthier taxpayers harder than another proposal on the table.
The estate tax lapsed temporarily on Jan. 1 after the Senate failed to extend it last year. If lawmakers do nothing, the tax will resume in 2011 with a 55% rate on estates above about $1.2 million. Last year, estates of more than $3.5 million for an individual were subject to a 45% tax.
Mr. Sanders and his co-sponsors said, "It's time for multi-millionaires and billionaires to pay their fair share."
Under the proposal, as in 2009, the exemption would be $3.5 million for an individual, or as much as $7 million for a couple, with a tax rate of 45%. But estates with taxable assets between $10 million and $50 million would pay a 50% rate, and estates valued above $50 million would pay 55%. A further 10% surtax would apply to assets above $500 million.
The changes would be retroactive to Jan. 1 of this year.
"The Sanders proposal is one extreme in the current debate," said Clint Stretch, an analyst at Deloitte Tax. "The challenge for the Senate is whether the members can agree to anything at all."
Another estate-tax proposal, offered by Democratic Sen. Blanche Lincoln of Arkansas and Republican Sen. Jon Kyl of Arizona, has been stalled since attracting a flurry of support in May. The new regime would not begin until 2011, when the tax rate would be 44% after an individual exemption of $3.5 million. But after a 10-year phase-in period, the rate would be 35% after an individual exemption of $5 million.
via online.wsj.com
Estate Tax Reform Lives. Or maybe not. The picture from Congress is murky at best. My best guess is still that Congress will do nothing with the estate tax this year. They will simply let the pre-2002 rules come back into effect on January 1, 2011, and thereby effect a huge tax increase without having to pass a bill to do it.