New estate-tax measure would phase in exemption

A bipartisan estate-tax measure backed by the American Farm Bureau Federation and the National Farmers Union would set the federal tax rate on estates at 35 percent, with a $5 million exemption that would be phased in over 10 years. "That phase-in is a change from previous legislation introduced by the two senators and is meant to reduce the short-term cost," Bob Meyer of Brownfield Network reports. President Obama has proposed a 45 percent rate with a $3.5 million exemption.

Democratic Sen. Blanche Lincoln of Arkansas and Republican Sen. Jon Kyl of Arizona filed the measure as an amendment to the proposed Small Business Jobs and Credit Act of 2010. "The plan would also give a choice to estates this year between the current rules – no estate tax, but a capital gains tax imposed when the inherited assets are sold – and the estate tax rates that would be in effect under the Kyl-Lincoln proposal," Meyer reports.

The tax-cut package passed in 2001 gradually reduced the federal estate tax to the point that it it was eliminated this year, but Congress made the package expire to limit its long-term costs. If the law is left unchanged, estates larger than $1 million would be taxed next year at 55 percent. (Read more)