August 1 was a significant day in the ongoing congressional battle over tax policy.
Levin Amendment – During consideration of the Republicans’ one-year tax extension bill, Congressman Sander Levin (D-MI) offered an amendment to replace the measure with the Senate-passed bill. The Senate measure would extend current rates only for individuals earning under $200,000 per year ($250,000 for couples) and make no changes related to estate taxes (which will revert to a 55% rate and a $1 million exemption next year without legislative action). The Levin amendment was defeated by a vote of 170-257. 170 Democrats supported the amendment, while all 238 Republicans present and 19 Democrats opposed it.
Motion to Recommit – Later Congressman Pete DeFazio (D-OR) offered a procedural motion that would have instructed the Ways and Means Committee to report the bill back with a $1 million income threshold, allowing tax rates to increase only on individuals earning more than that amount. The DeFazio motion was also defeated by a vote of 181-246. 179 Democrats and 2 Republicans supported the motion, while 236 Republicans and 10 Democrats opposed it.
GOP Plan Passage – The underlying bill (HR 8), which would extend current tax rates for all income levels and preserve the 35% estate tax rate and $5.12 million indexed exemption through 2013, then passed by a vote of 256-171. 237 Republicans and 19 Democrats supported the bill, while 170 Democrats and 1 Republican opposed it.
Comprehensive Reform – On August 2, the House is expected to turn to another GOP-sponsored bill (HR 6169) laying out a path for consideration of comprehensive tax reform under expedited procedures in 2013.
What It All Means – The net result of the recent flurry of activity is that both parties have been able to focus attention on their broader tax reform messages, specifically with regards to income taxes and the $200,000 threshold. At the same time, estate tax reform has reemerged as a key issue.
While preferring full repeal, Republicans have demonstrated their near universal support for preserving 35/5 in the current tax extension debate. On the other side of the aisle, Democratic leaders continue to echo the President’s call for a return to 45/3.5, but the voices of our Democratic allies are getting stronger, with larger numbers standing up to oppose estate tax increases and doing so in more outspoken ways.
The debates have also demonstrated a real danger for us – being left out of any tax reform package – as we saw last week in the Senate. While the justification was an attempt to avoid Democratic divisions over the issue on a bill that stood little chance of being enacted, we are keenly aware that if Congress fails to act this year families will face a confiscatory 55% rate and little protection from a $1 million exemption.
And that’s the fight ahead of us this fall. If you have not yet this year, please consider making a generous contribution to Policy and Taxation Group. The fight for estate tax relief is at a critical juncture, and your help is necessary to ensure we have the resources, research and muscle to protect our families from a destabilizing tax burden on family enterprises. Please contact Christine Hall at [email protected] to get involved!