{"id":1560,"date":"2008-04-07T13:22:00","date_gmt":"2008-04-07T17:22:00","guid":{"rendered":"https:\/\/www.actec.org\/?post_type=capital-letter&p=1560"},"modified":"2024-04-17T17:14:55","modified_gmt":"2024-04-17T21:14:55","slug":"senate-hearings-keep-estate-tax-reform-hopes-alive","status":"publish","type":"capital-letter","link":"https:\/\/www.actec.org\/capital-letter\/senate-hearings-keep-estate-tax-reform-hopes-alive\/","title":{"rendered":"Senate Hearings Keep Estate Tax Reform Hopes Alive"},"content":{"rendered":"\n

A Finance Committee hearing focuses on narrow topics but affirms the interest of some Senators in estate tax reform. Nevertheless, legislation still faces political and fiscal obstacles.<\/em><\/strong>

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Dear Readers Who Follow Washington Developments:<\/p>\n\n\n\n

Last Thursday, April 3, 2008, the\u00a0Senate Finance Committee<\/a>\u00a0held its third and final\u00a0hearing on the estate tax. \u00a0 <\/p>\n\n\n\n

The\u00a0first hearing\u00a0had been on November 14, 2007. A\u00a0manufacturer from Iowa\u00a0and a\u00a0rancher from Nevada\u00a0advocated repeal of the estate tax or at least a substantial increase in the exemption. Warren Buffett of Berkshire Hathaway supported a progressive, higher estate tax (with an exemption of perhaps $4 million) as necessary to prevent \u201cplutocracy.\u201d\u00a0ACTEC Fellow Conrad Teitell\u00a0pointed out the caprice of current law and the complexities and uncertainties faced in estate planning. Both Chairman Baucus and\u00a0Ranking Member Grassley<\/a>\u00a0complained about the estate tax, expressed their preference for repeal, but offered a commitment to serious reform as an achievable alternative. Chairman Baucus promised more extensive hearings in 2008, but he pointed to action in the 111th Congress (2009-2010) as the goal. \u00a0 <\/p>\n\n\n\n

The\u00a0first hearing of 2008\u00a0was held on March 12. Three professors, including\u00a0Academic Fellow Joe Dodge, discussed alternatives to the estate tax system, largely donee-based taxes such as inheritance taxes and inclusion of inheritances in income, as well as income taxes on gains at the donor level. It was clear that the Senators in attendance (three Democrats and three Republicans at various times) were not inclined to replace the estate tax with another regime, although they obviously were aware of the coming anomaly in 2010 and 2011 and seemed interested in finding some way to avoid it. Both Democrats and Republicans expressed concern for the liquidity problems of family-owned farms and businesses. \u00a0<\/p>\n\n\n\n

Last week\u2019s witness panel included President-Elect\u00a0Dennis Belcher\u00a0and Transfer Tax Study Committee Chair\u00a0Shirley Kovar. Dennis had chaired the multi-organization Task Force on Federal Wealth Transfer Taxes, which in 2004 had published a\u00a0200-page report\u00a0identifying issues presented by current law (including 2010), analyzing various options for addressing those issues, and evaluating alternative approaches to the taxation of wealth transfers. Dennis had been invited to show the Committee the need to clarify, modernize, simplify, and otherwise improve the rules for deferred payment of estate tax under\u00a0section 6166<\/a>. \u00a0 <\/p>\n\n\n\n

Shirley had been invited to talk to the Committee about the \u201cportability\u201d of transfer tax exemptions (and exemption equivalents represented by the unified credit) from deceased spouses to surviving spouses, a concept that has been viewed favorably for a long time. The practical issues presented by the portability concept were addressed in\u00a0chapter 17\u00a0of the Task Force\u2019s 2004 report, and portability was given an important boost by its inclusion in the\u00a0\u201cPermanent Estate Tax Relief Act of 2006\u201d (H.R. 5638)<\/a>\u00a0and the\u00a0\u201cEstate Tax and Extension of Tax Relief Act of 2006\u201d (H.R. 5970)<\/a>, which had been passed by the House of Representatives for Senate consideration in the summer of 2006. (See\u00a0Capital Letter No. 1.<\/a>) Shirley was able not only to draw from that history but to speak explicitly on ACTEC\u2019s behalf (a rare privilege) in support of the legislative proposal on portability that had been prepared by the Transfer Tax Study Committee and unanimously approved by the Board of Regents on March 10, 2008. \u00a0 <\/p>\n\n\n\n

Another witness,\u00a0Roby Sawyers, who had been an AICPA representative on the Task Force on Federal Wealth Transfer Taxes, made the case for reunifying the estate and gift tax unified credits. The final witness, the president of Independent Sector, spoke about the effect of the estate tax on charitable giving. <\/p>\n\n\n\n

The Senators in attendance (three Democrats and two Republicans at various times) seemed interested in the topics and the witnesses\u2019 testimony and interested in understanding the issues correctly. By the way, it might seem that in a committee of 21 members the attendance of six Senators last month and five this month is rather paltry. But in fact, with other, more politically charged, things always going on at the same time, this attendance is really not bad. It is not unusual to have tax hearings with only a chairman, and there have been instances of hearings chaired, at least temporarily, by a senior staff member because no Senator was present at the time.   <\/p>\n\n\n\n

Observers who are anxious to see significant structural changes to the estate tax law might be concerned by the narrowness of the topics the Finance Committee had asked the witnesses to address, although those topics might provide some clues about the \u201ctargeted\u201d relief we might look for in any legislation (tied to family farms and other family businesses which have been a public concern of Senators, especially Democrats like Senators Lincoln of Arkansas and Salazar of Colorado). But significant structural changes require a fair amount of attention and time by Senators and staff, and there are still too many distractions in Congress to expect much of that this year. The apparent interest in moving quickly to address the 2009-2010-2011 disconnect was strong enough on both sides of the aisle that there is probably more reason to be optimistic about legislation in 2008 than there has ever been. That is not saying much, though, and there are still plenty of obstacles to congressional action this year, including the following:  <\/p>\n\n\n\n