The latest attempt by Republicans in the US Congress to permanently repeal estate tax has stalled in the Senate.
Offered as an amendment to the small business jobs bills, Senator Jim DeMin’s proposal was thrown out after failing to secure the necessary 60 votes for it to proceed. While two Democrats voted in support of DeMint’s amendment, three Republicans joined the majority of Democrats who voted against, and the proposal only garnered 39 votes.
Under tax legislation enacted in 2001, the estate tax rate has been gradually declining while the exemption thresholds have been increasing until, for 2010, the tax has been repealed altogether. However, the tax is scheduled to bounce back at pre-2001 levels – a rate of 55% with an exemption threshold of USD1m for individuals and USD2m for couples – in 2011 if legislation is not passed to permanently repeal it or reduce its scope.
Sen. DeMint argues that the tax, if reintroduced at these levels, would affect thousands of small businesses and lead to higher levels of unemployment.
“The death tax kills jobs, hurts small businesses, destroys family farms and President Obama’s plan to hike it from zero percent to 55% next year is unconscionable,” he said.
“The death tax is an unfair, immoral double tax on property and assets that folks have already paid taxes on throughout their lives. If President Obama and Democrats get their way, Washington could get over half of family estates, farms and small businesses, a greater inheritance than the children of the deceased,” he added.
According to DeMint, analysis by the former director of the Congressional Budget Office, Douglas Holtz-Eakin, and the president of Research on the Economics of Taxation, Stephen Entin, found that permanently repealing the death tax, as outlined by the DeMint Amendment, could create 1.5 million jobs.
While many Democrats do support reducing or permanently repealing the estate tax, particularly those from agricultural states, previous attempts to curtail the levy have also failed. Last December, a proposal by US Congressman Earl Pomeroy, a South Dakota Democrat, to make permanent the 2009 estate tax exemption level of USD3.5m for an individual (USD7m for a married couple) and the maximum tax rate of 45%, was approved by the House of Representatives. However, the provision was never voted on in the Senate.
A recent Center on Budget and Policy Priorities analysis suggested that only 100 small business and farm estates would owe any estate tax in 2010 if the 2009 rules were extended.
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