Blogs Derek's Tax Blog They Said it Couldn't Happen
Rep.Earl Pomeroy says that efforts to get an estate tax fix in this year have failed and that repeal is likely. This follows the Dec. 3rd vote by the house to extend the current estate tax exemptions and rates indefinitely. The Senate has failed to take up that measure, focusing instead on the continuing health care debate, which Senate leaders have vowed to complete this year. However, the Senate must pass a defense appropriations bill and an increase in the federal debt ceiling before they break for the year. These bills will likely come to a vote in the House this week. House leaders are completing negotiations with Senate leaders so that these bills will be able to passed by the Senate as is, forestalling the need for conference committee bills.
Over the last week or so it has become clear that the House estate tax bill was not going to fly in the Senate and that a compromise, possibly a one or two year extension of the current law, would be necessary. The most likely way to get the measure through would be to add it to the defense appropriations bill, which has become the "last helicopter out of Saigon". To make the measure more palatable to the Senate, it was reduced to an extension of only 2 months. That would have prevented the January repeal, but would have set the stage for further debate in 2010.
With the Democratic leadership and the President behind the extension of the current estate tax law, it seemed an easy call to many to say that next year's repeal of the estate tax wouldn't happen. But the estate tax creates strange bedfellows as was illustrated in the vote in the House on December 3rd where all of the Republicans (in favor of full repeal), Liberal Democrats (in favor of a higher estate tax), and farm state Democrats (in favor of a higher exemption) all voted against the measure. Those same forces are in the Senate where the Republicans would be happy to see the one year repeal believing it will enable them to permanently repeal the estate tax in the future or at least give them a good campaign issue. There are also enough Democrats in the Senate who are unwilling to vote for the measure thereby preventing the 60 votes necessary to move it along.
Does this mean that someone who dies on January 1st will avoid taxation? Probably not. Again from Rep. Pomeroy, "the prospects are 100%" that Congress will come back next year and reinstate the tax, and make it retroactive to Jan. 1, 2010. Then again, they said it couldn't happen in the first place.