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HOUSE VOTE ON ESTATE TAX BILL TODAY

June 22, 2006

The House of Representatives is expected to pass Rep. Bill Thomas's H.R. 5638, "The Permanent Estate Tax Relief Act of 2006," today. The key vote comes next week when the Senate tries to gather the 60 votes needed to pass the bill. The bill now includes a provision indexing the $5 million exemption amount for inflation.

The TaxProf has a roundup of news and commentary. My own view: The Thomas bill has some of the features of a desirable estate tax - a low rate and a large exemption. It lacks other features that would make for good tax policy; these include repeal of special valuation and payment rules for small businesses and farmers (with a large exemption and low rate, these have no justification) and enactment of uniform valuation rules that would end the benefits of tax engineering like family limited partnerships to hold marketable securities.

Still, it's an improvement on the current system with its punitive rates, and it's a huge improvement over the one-year exemption in 2010 followed by 60% rates in 2011.

The most compelling argument against the Thomas bill is that it will cause the government to forsake a lot of revenue. That's poor justification for bad tax policy, and the current high-rate, loophole-ridden system is a model of bad policy. I think the opponents of the Thomas bill would have a much better argument if they laid out a better alternative to H.R. 5638 than simply keeping the current mess in place.

A more detailed discussion of my views can be found here.

Prior Tax Update coverage:

THOMAS INTRODUCES ESTATE TAX COMPROMISE

THOMAS COMPROMISE MAY BE SHORT OF 60 SENATE VOTES

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