Last Thursday Senator Bernard Sanders (I-VT), joined by Senators Sherrod Brown (D-OH), Al Franken (D-MN), Tom Harkin (D-IA), and Sheldon Whitehouse (D-RI), introduced S. 3533, "A bill to amend the Internal Revenue Code of 1986 to reinstate estate and generation-skipping taxes, and for other purposes." This bill calls for the following:
- Reinstating the federal estate tax retroactively to January 1, 2010, with a $3.5 million estate tax exemption and initial 45% estate tax rate (the exemption and tax rate that were in effect in 2009).
- For estates valued above $10 million and below $50 million, a 50% estate tax rate.
- For estates valued above $50 million, a 55% estate tax rate.
- For estates valued above $500 million, a 10% surtax.
- Requiring a 10-year minimum term for grantor retained annuity trusts ("GRATs").
- Requiring consistent valuations for estate tax purposes and modifying the rules governing valuation discounts.
- Easing the estate tax burden on family farms by allowing an additional $3 million to be excluded from the value of an estate.
The Tax Policy Center has estimated that if nothing is done about the federal estate tax in 2010 and it is allowed to come back in 2011 with only a $1 million exemption and 55% estate tax rate, then approximately 44,000 estates would pay a total of $34 billion in estate taxes in 2011. This is in sharp contrast to the 5,500 estates that paid $14 billion in estate taxes in 2009, when, as mentioned above, the estate tax exemption was $3.5 million and the rate was 45%.
But while S. 3533 may ease the estate tax burden for many families, if it does become law and is applied retroactively, then it will most certainly be challenged by the heirs of billionaire Dan Duncan who are relying on this year of estate tax repeal to wipe out their estate tax bill.
The bottom line - don't hold your breathe on this one. Once again it's just more political posturing that in the end will go nowhere. Count on the federal estate tax to return in 2011 with a $1 million estate tax exemption and 55% estate tax rate.
- Three Senators Call For Billionaire Estate Surtax
- Senator introduces legislation to shift tax burden back to billionaires
- Kissing a Retroactive Estate Tax Goodbye
- Is Senator Kyl's Secret Estate Tax Plan Closer to Becoming a Reality?
- Billionaire's Children and Grandchildren Reap the Benefits of Estate Tax Repeal
- Overview of Current Federal Estate Tax Laws
- What is the Future of the Federal Estate Tax?