We finally got an indication yesterday that the estate tax, which lapsed at the beginning of the year and has cost the U.S. Treasury billions with the deaths of several uber-rich individuals in 2010, might be back.
There's always been a contingent that's wanted to permanently kill the estate tax. The interesting thing this year is that it's primarily the same group that's continually railing against measures it sees increasing the federal deficit.
Somehow they've managed to reconcile in their own minds that it's OK to increase the deficit by letting the very wealthy escape taxation. And don't kid yourselves; that's the very small group of taxpayers who are really affected by the estate tax.
The current standard bearer in this effort is Republican Senator Jim DeMint, who on Wednesday tried to tack his proposal to kill the estate tax onto the unemployment benefits extension bill that finally cleared the Senate.
The vote was surprisingly wide: 39 to kill the estate tax, 59 to bring it back to life.
Senators even crossed party lines. Two Democrats, Blanche Lincoln of Arkansas and Ben Nelson of Nebraska, went with DeMint. But three Republicans, Maine's two Senators, Olympia Snowe and Susan Collins, and George Voinovich of Ohio -- voted with Dems who want the tax back on the books.
There are two measures pending in the Senate to revive the estate tax.
The one that appears to have more support is the bipartisan bill introduced by Lincoln and her GOP colleague Jon Kyl of Arizona. It would set the tax rate at 35 percent on estates of more than $5 million.
Lincoln and Kyl also would allow for for stepped-up basis treatment of inherited assets, meaning heirs would count the value of bequeathed property as its fair market value on the date of the decedent's death.
The other bill, introduced by Sen. Bernard Sanders, I-Vt., would exempt the first $3.5 million of an estate from federal taxation but would also institute a progressive rate structure under which estates valued at more than $3.5 million and less than $10 million would be taxed at 45 percent and those worth more than $10 million but less than $50 million would be taxed at 50 percent.
Sanders also would add a 10-percent surtax on billionaires.
I suspect that the Lincoln-Kyl bill will win out since it's simpler. That's going to be important the longer Congress waits to act.
But they will act. If they don't, the estate tax will rise from the dead on its own on Jan. 1, with an exemption amount of only $1 million and a tax rate of 55 percent.
And although very few Americans have to pay the estate tax each year, the mere appearance of letting such a dramatic tax hike back into law is not a wise move in an election year.