House Votes to Make Estate Tax Permanent

The House today voted to avoid eliminating the estate tax next year, only to have it return in 2011 at higher levels. Instead, the current levels of the tax, 45 percent with an exemption of $3.5 million per individual, will be extended permanently.

The quirks of the current law were the result of budget gimmicks to hide the costs of a permanent repeal. Lawmakers are scurrying to extend the tax before it temporarily expires on December 31, just to return at pre-2001 levels of 55 percent with a $1 million exemption a year later.

Senate action on the measure is uncertain, given the current health care debate taking up floor time and disagreement over rates and exemption levels among Senators.

The House bill will cost roughly $235 billion over ten years. Unfortunately, though, none of it will be paid for, meaning that its passage would widen future deficits.