By U.S. Senator Jon Kyl

For one year only, Americans wont get taxed after they die.

On January 1, the death tax will finally be repealed. But relief from this onerous tax wont last, as it will return with a vengeance in 2011 with a rate of 55 percent and an exemption amount of just $1 million.

This is the perverse result of the Byzantine budget rules under which Congress is forced to operate, where spending programs are automatically assumed to continue forever and tax relief is assumed to be temporary.

I have always believed that permanent repeal of the death tax represents the best policy, since it frees capital in the private market for more productive uses than fueling the federal governments spending binge. However, even in the best of times, we have only been able to win 56 votes in the Senate for repeal, just shy of the needed 60. With the current makeup of Congress, permanent repeal is simply not in reach.

With that in mind, Democratic Senator Blanche Lincoln and I offered an amendment to the Senate budget resolution in 2009 that attempted to strike the best compromise. It would have permanently established a 35 percent death tax rate with a $5 million exemption amount indexed to inflation. That amendment passed by a vote of 51 to 48 with the support of 11 Democrats and every Republican senator. But, unfortunately, the congressional budget resolution is only an advisory measure.

The House of Representatives recently approved a bill that would set the death tax rate permanently at 45 percent with a $3.5 million exemption amount (the same as 2009 levels). While I believe the rate is too high and the exemption too low, this measure at least had the virtue of being permanent.

Senate Finance Committee Chairman Max Baucus also attempted to extend the 2009 rate and exemption level for the first two months of 2010, arguing that this extension would give taxpayers certainty until Congress figures out how to legislate permanent reform.

Senator Baucus has known since 2001 that the tax would be temporarily repealed, but has done nothing about it. In fact, Ive repeatedly requested that the Senate Finance Committee address permanent death tax reform, knowing that in 2010 it would be fully repealed before returning to its pre-2001 confiscatory rates. Instead, Baucus waited until December 16, 2009 to ask for a short-term extension of a tax that is scheduled to die.

I believe it is likely Congress will deal with permanent reform next year. We need to act before 2011 when the rate jumps back to 55 percent.

The Joint Committee on Taxation estimates that nearly 600,000 estates would once again be subject to the death tax over the following 10 years. With a tax rate as high as 55 percent, former Congressional Budget Office Director Doug Holtz-Eakin estimates small businesses would be forced to reduce their payrolls by more than 500,000 workers. This would be a disaster for an economy still deep in recession, and unemployment hovering at the highest rate in almost 30 years.

If we could count on the support of more members of the Senate and House for full repeal, our strategy might be different. But given the numbers we have, the compromise I proposed with Senator Lincoln provides the best long-term economic policy. In fact, the Institute for the Research of the Economics of Taxation estimated that the Lincoln-Kyl amendment would add more than $200 billion in annual economic growth relative to current law.

As the Wall Street Journal recently editorialized, Study after study, including one co-authored years ago by White House economist Larry Summers, finds that a powerful motivation for entrepreneurs to grow their businesses is to pass that legacy to their children. The left disparages this as building ˜family dynasties, but most Americans think that it is immoral for the government to confiscate the fruits of a lifes effort merely because of the fact of death.

Sen. Jon Kyl is the Senate Republican Whip and serves on the Senate Finance and Judiciary committees. Visit his website at or his YouTube channel at   back...
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