Senate Bill to Permanently Repeal Estate TaxApril 3, 2012
On March 28, Senator John Thune (R-S.D.) introduced with 20 original cosponsors, the Death Tax Repeal Permanency Act (S. 2242) to abolish the federal estate tax. The bipartisan legislation is identical to the bill (H.R. 1259) introduced in the House by Rep. Kevin Brady (R-Texas) which has over 200 bipartisan cosponsors.
Along with repealing the estate tax, Sen. Thune’s bill would also repeal the generation skipping transfer (GST) tax, make permanent the maximum 35 percent gift tax rate and a $5 million lifetime gift tax exemption, and maintain the stepped-up basis provisions important to family businesses.
For 2012, the tax is set at a 35 percent rate with a $5 million exemption. However, without congressional action, the estate tax will jump to pre-2001 levels with a top marginal 55 percent tax rate and $1 million exemption.
Repealing the estate tax would create a 1.5 million additional small business jobs according to a recent study by Douglas Holtz-Eakin, the former director of the Congressional Budget Office. His study also says the repeal would decrease the national unemployment rate by nearly one percent.
Thune said that, ideally, this issue would be part of a broader effort at comprehensive tax reform, expected to be taken up by Congress after this year’s election. However, current tax rates and exemptions are set to expire at the end of 2012, making action necessary this year, he said.
The future of the estate tax regime after 2012 is a cause for major concern for family businesses, many of which are struggling to guarantee that their business survives into the next generation. NSBA has urged congressional action on meaningful reform with at least a fully indexed $3.5 million exemption for individuals, the lowest possible rate, and a step-up in basis, allowing heirs to use the higher basis to figure their gain when the property is ultimately sold. Reducing the tax burden on small businesses has always been a top priority for NSBA and we are pleased to see Sen. Thune’s efforts for full and permanent repeal of the estate tax.
Cosponsors of the Thune legislation include: Senators Marco Rubio (R-Fla.), John Boozman (R-Ark.), John Barrasso (R-Wyo.), Roy Blunt (R-Mo.), John Cornyn (R-Texas), Mike Crapo (R-Idaho), Michael Enzi (R-Nev.), Charles Grassley (R-Iowa), Dean Heller (R-Nev.), James Inhofe (R-Okla.), Johnny Isakson (R-Ga.), John Kyl (R-Ariz.), Mike Lee (R-Utah), Richard Lugar (R-Ind.), John McCain (R-Ariz.), Mitch McConnell (R-Kent.), Jerry Moran (R-Kan.), Rand Paul (R-Kent.), Pat Roberts (R-Kan.), and David Vitter (R-La.).