This bill also represents a significant step backwards from the 2010 compromise reached on the estate tax. By excluding the estate tax from the bill, the maximum estate tax rate will revert to 55 percent while the exemption level will drop to $1 million. This will increase the number of estates hit with the tax from 3,600 to 46,700, including 21,700 small businesses. The uncertainty of the current law has left many family-owned businesses guessing about their estate tax liabilities and unable to make prudent business decisions.
S. 3412 only extends the Alternative Minimum Tax Relief through the end of 2012, which will expose over 23 million individuals and small business to greatly increased tax liability in 2013. This additional tax hike will add further to the negative economic consequences of this legislation.
Senate Democrats Drop Estate Tax Language
Senate Democrats removed any mention of the estate tax from legislation headed to the floor that would extend the 2001 and 2003 tax cuts for families earning $250,000 or less,
Since the Reid plan does not address the estate tax, unless addressed in other legislation, the estate tax rate would revert to a maximum of 55% for 2013 - up from 35% for 2012 - and the exclusion level would drop to $1 million from $5.12 million this year. An earlier version of Reid's legislation would have set the estate tax rate at a maximum of 45% while dropping the exclusion level to $3.5 million.
The underlying legislation would set the top rates for dividends and capital gains at 20% for 2013, would reinstate the personal exemption phaseout (PEP) and overall limitation on itemized deductions (Pease) that apply to that same category of high-income households, and extend the American Opportunity tax credit, the child tax credit, and the earned income tax credit for another year,
"The truth is, if we decouple the tax cuts for those earning above $250,000, that means they will be gone for good," Schumer said.