Senate Disagreements Stymie Any Deal on Estate Tax

Democrats sharply divided on estate tax rate and exemption threshold.

May 20, 2010

WASHINGTON - Congress Daily reports that an estate tax agreement is far from certain and speculates that it could even return at a 55 percent rate and $1 million per spouse exemption beginning January 1, 2011.

Senate Democrats discussed the issue at a heated policy luncheon earlier this week, while failing to reach a consensus.

Sen. Bernie Sanders (I-VT) advocated the 55 percent/$1 million exemption approach, maintaining that the pre-2001 rates would only affect 2 percent of the country's estates. When asked about reducing the tax to 35 percent while lifting the exemption to $5 million, he said, "I will do everything I can to stop that."

On the other side is Senate Small Business Chairwoman Mary Landrieu (D-LA), who supports the reduced rate and higher exemption. "We've been rasslin' and struggling with how to resolve this estate tax issue, and the fact of the matter is, even in the Democratic Caucus, there are varying views," she told the news source, calling the 35%/$5 million parameters a "reasonable compromise."

Landrieu said she would exempt more than 99 percent of small businesses from the tax, though acknowledged that votes remain scarce. "I don't know what's going to happen," she said. "It just doesn't seem like there's enough votes to do anything. There doesn't seem to be 60 votes at this point to do any of those proposals."

Sen. Bob Casey (D-PA) said that the majority of Senate Democrats oppose the 35 percent/$5 million plan, estimating the split at "80 percent, 20 percent" against.

"I think we're not yet at the point where we're drawing lines, but the idea that we're going to give an incredible economic advantage to less than 1 percent of our taxpaying population is really offensive to me, to understate it dramatically," Casey said. "Most of our caucus is very concerned about what will happen on the estate tax, and I think there are some who would probably be with Sen. Kyl, but I think it's a small number."

Capitol Hill insiders said that Finance Chairman Max Baucus (D-MT) and Minority Whip Jon Kyl (R-AZ) previously were in general agreement on the 35 percent rate with a $5 million exemption, though Baucus dismissed talk of any loose agreement earlier this week. "There is no agreement on the estate tax in either substance or process. None whatsoever."

Kyl conceded that whatever agreement might have existed has now disappeared. "We no longer have an agreement, because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they're not going to allow it on the floor, at least not voluntarily," Kyl said.

Senate Finance Republicans expressed frustration at the unsettled issue. "It's very frustrating because we thought we had a deal," said Sen. Orrin Hatch (R-UT). "We thought we put it together in a way we thought was acceptable, and the Democrats are backing off on resolving it."

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