Senate Republicans have blocked efforts to renew estate tax law, which expires at the end of this year. Wednesday, Senate Finance Committee Chairman Max Baucus, D-Mont., asked to introduce a measure that would have extended the tax for two months, providing more time to work out a deal. Majority Leader Harry Reid, D-Nev., argues without the move, farmers and others would still face full return of estate taxes in 2011.But that move failed. Now it looks like the 45% tax on estates, after a $3.5 million exemption, disappears for a year and then jumps 2001 levels of 55%, with an exemption of $1 million.
Senate Minority Leader Mitch McConnell, R-Ky., blocked Baucus' effort, saying Americans, even after informed that the estate tax may not apply to them, object to it on principle. Republicans insist the estate tax should die, but countered Baucus with a $10 million per couple exemption and 35%. Both sides said no setting the stage for more talks, even into next year and a possible retroactive bill.
Steve Wamhoff, legislative director for Citizens for Tax Justice, said, "We're a little concerned that if it's allowed to disappear, some lawmakers will be more tempted to make that permanent."
Once the tax expires, those inheriting estates after December 31 will have to pay capital gains taxes on any asset sold. The cost will be based on the original price of the property, which could mean record-keeping headaches and bigger tax bills for some people.