Senate Republicans are working on an estate-tax compromise with Democrats rather than a repeal backed by long-time Republican foes of the tax, The Post has learned.
Last December, Congress passed a new law just weeks before old one expired, making the estate-tax exemption $5 million for 2011 and 2012.
What’s more, the tax rate on estates above that amount became 35 percent. If Congress hadn’t acted, estate taxes, which didn’t exist in 2010, would have automatically become 55 percent for inheritances of more than $1 million. The change was a boon to the wealthy, giving a break to tens of thousands of taxpayers annually.
Lawmakers are taking up the hot-button tax issue now before the current two-year law expires, potentially avoiding more wrangling. “I think this time there is more of a willingness to compromise than last time,” a Republican Senate source said.
While it’s still early, leaders in both parties appear comfortable with the $5 million exemption, the source said.
The chief difference is that the Democrats would like the rate on the taxable portion of the estate to return to 2009’s 45 percent level, while Republicans want to keep it at 35 percent, the source said.
President Obama in his 2012 budget proposal called for a $3.5 million exemption and a 45 percent tax rate, so his fellow Democrats have already moved off some of his benchmarks.
South Carolina Senator and Tea Party favorite Jim DeMint wants the estate tax to be repealed, but his fellow Republicans are divided and no Democrat supports an outright repeal, the source said.
If nothing happens, the tax exemption in 2013 would fall to $1 million and the rate would rise to 55 percent. Plans are to bring a new estate law tto the floor after the present debt-ceiling debate.