Notes on the proposal by Sens. Blanche Lincoln [D-AR] and Jon Kyl [R-AZ]:
- Stated purposes? To help “hardworking farmers and small businesses” and to take Congressional action to bring certainty to the federal estate tax. (See press release.)
- Method? The proposal is not a new bill. Instead, the proposal would require the Senate Finance Committee to amend H.R. 5297, the Small Business Lending bill. Senator Kyl explains why the proposal would be added as an amendment: “If the Small Business Lending bill is intended to help small business create jobs, wouldn’t it make sense to provide small business owners with the certainty that their tax rates aren’t going to skyrocket at the beginning of next year?” (From press release.)
- Estate tax rate? 35% (permanent). Note, however, that the Motion to Commit states that the rate will be “a 35 percent estate tax rate phased in over 10 years.”
- Exemption? $5M phased in over 10 years.
- Indexed for inflation? Yes.
- Basis? Stepped-up basis (election for modified carryover basis in 2010).
- Retroactivity? Yes, but optional: “The Lincoln-Kyl proposal provides an election for deceased taxpayers to either retain this year’s estate tax rate, which is zero percent with ‘carry over basis,’ or file under the provisions of the new bill.” (From press release.)
- Offset? Yes. The “proposal also instructs the Senate Finance Committee to offset the difference in revenue loss between the Obama administration’s proposed 45 percent estate tax rate with a $3.5 million exemption amount and their proposed reform.” (From press release.)
- The press release states, “Senators Lincoln and Kyl introduced a similar measure in April 2009 that received broad bipartisan support and was successfully added to the non-binding congressional budget resolution.” But the April 2009 measure was criticized by the Center on Budget and Policy Priorities. Chuck Marr and Jason Levitis, Lincoln-Kyl Estate Tax Amendment is Both Unnecessary and Unaffordable, CBPP, Apr. 10, 2009.
- A few months ago, Sens. Lincoln and Kyl tried to gather support for their proposal, but their efforts were stalled. Again, their proposal was criticized by the CBPP. Chuck Marr and Gillian Brunet, Stalled Proposal to Cut Estate Tax Further Is Deeply Flawed and Should Not Be Revived, CBPP, May 21, 2010.
- N.B. I commented on the CBPP reports in a previous blog post, Two reports published by the Center on Budget and Policy Priorities criticize the stalled proposal to cut the federal estate tax (May 21, 2010). I made the following observation regarding the second CBPP report: “It is interesting to note that the report has ‘gimmicks’ of its own. It does not criticize just the recent proposal. . . . So, despite its title, the scope of the report is vaster than just the stalled proposal. This is a classic technique, or ‘gimmick,’ used in media activism: re-frame the conversation to make sure your cause’s points are discussed.”
- Press release: U.S. Senator Blanche Lincoln: Lincoln, Kyl Introduce Estate Tax Reform Proposal (July 14, 2010)
- Motion to Commit With Instructions
- Text of H.R. 5297
- Paul Caron, Kyl-Lincoln Estate Tax Fix: $5m Exemption, 35% Rate, Election for Decedents Dying in 2010, TaxProf Blog, July 14, 2010 (linking to press release and motion to commit).
- Sam Goldfarb, Lincoln, Kyl to Offer Estate Tax Motion on Small-Business Bill, Tax Notes Today, Doc 2010-15662, 2010 TNT 135-1, July 15, 2010 (“The Senate is not expected to begin floor action on H.R. 5297 until the week of July 19 at the earliest. Senate Majority Leader Harry Reid, D-Nev., has yet to determine which amendments will get floor votes, and he has accused Republicans of making his job difficult by offering amendments unrelated to small businesses. However, on July 14 Reid didn't rule out the possibility that senators could vote on the Lincoln-Kyl amendment, telling reporters, ‘We'll see.’”).
- Jay Heflin, Kyl seeks to add an estate tax fix to small-business bill, On the Money: The Hill’s Finance & Economy Blog, July 13, 2010 (“Senate Majority Leader Harry Reid (D-Nev.) has engaged a procedural maneuver called “filling the tree” that limits the number of amendments that can be offered on a particular bill.”).
- Carter Ruml, Breaking News – $5m Exemption and 35% Rate Sought As Amendment to Small Business Jobs Bill, KYEstates.com, July 14, 2010 (“It’s unclear whether the Lincoln-Kyl amendment is more than political theatre.”).
- Martin Vaughan, US Sens Kyl, Lincoln Seek Vote On Limiting Estate Tax, NASDAQ, July 14, 2010 (“The phase-in is a change from legislation Kyl and Lincoln have introduced in the past and is meant to make the short-term cost of the bill appear smaller. . . . In contrast to the Lincoln-Kyl proposal, U.S. President Barack Obama has proposed setting a 45% rate and a $3.5 million estate tax exemption amount.”).
[Updated 7/15/10 4:30 PM to correct typo - Sen. Kyl.]