Almost seven full months into 2010, the Senate might finally get around to addressing the death tax. The death tax expired on January 1 of this year, but because of a quirk in the budgeting process it will rise from the ashes in 2011 with a punitive 55 percent rate and less-than-generous $1 million exemption level unless Congress acts soon.
The long delay in the Senate has lead many to conclude that Senate Majority Leader Harry Reid (D–NV) does not want to address the death tax at all this year because he wants the death tax to come back at those punishing rate and exemption levels. The economy cannot afford for the 55 percent rate and $1 million exemption at any time, but now, in its badly weakened state, is an especially bad time.
Senators Jon Kyl (R–AZ) and Blanche Lincoln (D–AR) are thankfully unwilling to see that happen. They will file an amendment that extends the death tax permanently with a 35 percent rate and $5 million exemption (indexed for inflation) to the small business bill the Senate is currently debating.
The Kyl–Lincoln compromise is better than the bill that passed by the House of Representatives in December that set the death tax rate at 45 percent with a $3.5 million exemption. The House-passed bill is the preferred policy of President Obama and is the plan he offered in his two budget proposals.
Even though the Kyl–Lincoln plan is an improvement over the other plans, it is still far from perfect. It is laudable that Senators Kyl and Lincoln want to get the Senate moving on the death tax and compel Reid to act even though it is obvious he does not want to. Ultimately, however, their plan does not go far enough. If the death tax comes back at any rate, it will continue to destroy an unacceptable amount of jobs and slow down the already anemic economic recovery. With so many unemployed and the economy basically at a standstill, full repeal of the death tax would be welcome news to those put back to work.
It is long past time for Congress to abolish the death tax once and for all. Congress has ignored reforming the tax code for so long that the entire system is a large, unnecessary weight pulling the economy down. Repealing the death tax would be a good first step in the direction of fundamental reform that is long overdue.