Senator Formulates 'Death Tax' Compromise Plan

by Mike Godfrey, Tax-News.com, Washington

23 October 2003

Senator Jon Kyl, an Arizona Republican and a leading opponent of America’s estate tax has proposed modifications to the law that will lower the tax rate and raise exemption levels, in a proposal that breaks from the traditional Republican stance of an outright ban on the death duty.

According to various media reports, internal emails have revealed that Mr Kyl favors a bill that would raise estate tax exemption for couples to $30 million and for individuals to $15 million, whilst lowering the duty paid above these thresholds to 15% - the same rate as for capital gains and dividends.

Presently, estates worth up to $1 million are exempt from the death tax ($2 million for couples) which excludes all but 2% of estates in the United States. Above this level, the tax kicks in at a rate of 49%, which is to be eased to 48% next year when the exemption threshold is raised to $1.5 million.

Under a law enacted in 2001, the tax rate is set to fall to 45% in 2009 and the exemption level to be raised to $3.5 million before the tax disappears altogether in 2010, only to be resurrected in 2011 at a rate of 55%. Opponents of the so-called death tax have long campaigned for a permanent repeal of the law, although it is thought that the economic reality of the government’s finances is forcing a change of heart amongst many, a fact reflected in Senator Kyl’s compromise proposals.

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