Senators Agree ‘Basic Parameters’ Of Estate Tax Cut

by Mike Godfrey, Tax-News.com, Washington

14 July 2005

The United States Senate is edging closer towards a bipartisan consensus on new legislation that would permanently reduce the estate tax burden, although it is questionable whether this will be achieved before the Congressional recess in August.

According to Sen. John Kyl (R - Arizona), he and the ranking Democrat on the Finance Committee, Sen. Max Baucus (D - Montana) have reached agreement on the "basic parameters" of an estate tax compromise which will entail a lowering of the tax rate in combination with an increase in the estate tax threshold.

However, speaking on the issue on Tuesday, Baucus was more coy on the subject, stating that there remain many "moving parts" in the discussions, which he described as "very emotional." Nonetheless, he hinted that an agreement may be reached before the summer recess.

Initially Republicans had hoped to permanently repeal the estate tax, but have failed to gather the 60 votes needed to clear a procedural hurdle in the Senate.

Currently, the estate tax threshold is $1.5 million, which is set to rise to $3.5 million (and $7 million for couples) in 2009 under tax cuts passed in 2001. Meanwhile, rates are set to decline to 45% in 2009 before being repealed for one year. However, under the 2001 legislation, the tax will then be resurrected at the pre-2001 rate of 55%.

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