Yankees owner George Steinbrenner died last week, leaving a fortune estimated at $1.1 billion. He is the fourth billionaire to die this year — the only year since 1916 when there has not been a federal estate tax (it's currently scheduled to return in 2011). So even if the Yankees don't repeat as World Series champs, it's a very profitable year for the Steinbrenner family.
The opportunity to die without one's estate being taxed may disappear soon, however, as Congress appears finally ready to address the issue. On June 24, Senators Sanders (I-VT), Harkin (D-IA) and Whitehouse (D-RI) introduced estate tax legislation that would make permanent the $3.5 million exemption that was effective in 2009, with a progressive rate structure that would tax the taxable portion of estates over $10 million at 50 percent, over $50 million at 55 percent, and over $500 million at 65 percent. Yesterday, Congresswoman Linda Sanchez (D-CA) introduced the House version of this bill.
Earlier this week Senators Lincoln (D-AR) and Kyl (R-AZ) introduced their own estate tax legislation, which would reduce the rate to 35 percent and raise the exemption to $5 million ($10 million for couples).
Meanwhile, in the House, Representatives Thompson (D-CA) and Salazar (D-CO) have introduced estate tax legislation that would completely exempt farmland and would raise the exclusion for conservation easements to $5 million from its current $500,000. (See a report on all the reasons why this is a terrible idea.) One of the most alarming results would be that wealthy people start investing in farmland as never before, which could drive up prices for land and hurt genuine family farmers.
The Lincoln-Kyl proposal has been referred to the Senate Finance Committee with the pending small business jobs bill. Finance would need to find $80 billion in revenue offsets to cover the increased cost of their proposal compared to extending the rules in effect in 2009 (which is what President Obama proposes). Senators Lincoln and Kyl mask the true cost of their proposal by phasing in the cut in the estate tax over several years, meaning the $80 billion figure is misleadingly small.
With all the competing proposals and the lack of any clear consensus, it's anybody's guess where the estate tax will finally end up. But the estate tax holiday will soon be over.