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Estate Tax Debate Heats Up In Congress

Posted: July 27, 2012

Last week, Senate Democrats offered up a tax bill that would extend the current tax rates for individuals earning less than $200,000 and families earning less than $250,000 for one year. In addition the bill would increase the dividend rate from the current 15 percent to 25 percent. Missing from the bill is any provision to extend the current estate tax law. The current law exempts estates valued at $5 million or less ($10 million for couples) and taxes anything over the exemption at a rate of 35 percent. If not extended, on January 1, 2013, the estate tax exclusion will revert to $1 million ($2 million for couples) with a tax rate of 55 percent on amounts above the exclusion.

NFDA, along with other members of the Family Business Estate Tax Coalition, have sent a letter to the Senate majority and minority leaders that states in part

".... [We] support maintaining current estate tax policy, with an exemption level at $5 million and the maximum rate of 35%, until a permanent extension of current policy is enacted and that any relief related to the exemption is indexed to inflation, provides for spousal transfer and includes stepped-up basis. We believe it is essential that Congress act before the end of the year, or else the progress made on the estate tax will be undone by returning to the pre-2001 level of a $1 million exemption and a 55% rate to estates, and eliminating the current policy on spousal transfer. Such an outcome would have a devastating impact on family-owned businesses and farms. The uncertainty of the current law has left many family-owned businesses and farms guessing about their estate tax liabilities and unable to make prudent business decisions. The significant costs to plan for the estate tax reduce investment in business growth and job creation, which is only made worse by the current uncertainty surrounding the tax. Ultimately, a permanent solution is necessary because without it, there are no assurances that these businesses and family farms will continue to operate in future generations."

This week, the House will consider its version of the tax bill which will extend for one year all the current tax rates as well as the current estate tax law. NFDA and the other members of the Family Business Estate Tax Coalition will send a letter to the House speaker and minority leader expressing strong support for their bill.

NFDA will continue to actively advocate for making permanent the current estate tax law, or at least extending it for another year until Congress can address this issue on a permanent basis. This policy is consistent with NFDA's public policy position which states "NFDA strongly supports federal legislation that would make permanent the new current federal estate tax exclusion and rate."