Public Policy
Status
The estate tax is currently set to expire in 2010 and then, in 2011, return to 2002 levels, unless Congress takes action this year. The budget resolution adopted by Congress for fiscal year 2010 calls for extending the estate tax permanently at 2009 levels: an individual exemption of $3.5 million/$7 million per couple, and a tax rate of 45 percent.
The issue is far from settled, however, since the Senate narrowly approved an amendment to its original budget resolution that would have weakened the estate tax significantly. Offered by Senators Lincoln (D-AR) and Kyl (R-AZ), the amendment, which was supported by ten Democratic and all Republican senators, would raise the individual exemption to $5 million ($10 million/couple) and lower the tax rate to 35 percent.
Obama Budget Request
In his budget outline for fiscal year 2010, President Obama recommended permanently freezing the estate tax at the 2009 levels. More information on the President’s and Congressional budget proposals.
Independent Sector has long advocated for a fair and responsible estate tax which requires individuals of substantial wealth to give back to the communities in which they have lived and earned success through tax dollars or charitable contributions. In letters to senators and in a statement issued March 31, Independent Sector expressed support for the budget resolution estate tax language and opposition to the Lincoln-Kyl amendment, stating, “Any further weakening of the estate tax from 2009 levels would diminish an essential source of revenue to the charitable community and thereby weaken our ability to address the needs of the individuals and communities we serve.”
Citing IS, The New York Times in its lead editorial urging opposition to the Lincoln-Kyl amendment, said that “reducing the estate tax from the level proposed by Mr. Obama would cost an additional $250 billion in forgone revenue over 10 years, at a time when the nation already has to borrow heavily for real needs.” The Washington Post agrees, concluding in an editorial, “A vote for this amendment, at this time of so much red ink and so much suffering, would reflect the most skewed priorities.”
Write your senators and representatives and ask them to maintain the estate tax at the 2009 levels and oppose any efforts to weaken its impact on federal revenue and charitable giving. Review the estate tax talking points and add information about your organization to the sample letter provided. Locate contact information for your Senators and Representatives on the respective websites.
The Congressional Budget Office has found that the estate tax leads affluent individuals to donate far more than they otherwise would, because such donations sharply reduce estate tax liabilities. The CBO found that about one-sixth of the estates filing estate tax returns in 2000 left a charitable bequest which together totaled $16 billion. Charitable bequests were heavily concentrated in the largest estates with over 70 percent of the total bequests coming from estates valued at more than $3.5 million. (Congressional Budget Office, The Estate Tax and Charitable Giving, July 2004)
Permanent repeal of the estate tax would cost almost $1.3 trillion over the first ten years in which its cost would be fully felt, 2012-2021, according to the Center for Budget and Policy Priorities. This includes $1 trillion in lost revenue and $277 billion in increased interest payments on the national debt. According to the Urban Institute-Brookings Tax Policy Center, a proposal to raise the individual exemption to $5 million and lower the tax rate would reduce estate tax revenue by almost four-fifths as much as full repeal of the tax.
Additional Research and Resources
Last updated: May 5, 2009
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