A Possible Estate Tax Compromise

When I was in Washington, I got to like Ways and Means Committee Chairman Bill Thomas. Not everyone working in the White House shared that view. Some people found him hard to work with, but I was impressed by his intelligence and by the fact that he was usually fighting for good policy, as he saw it.

Last night, Thomas introduced a bill, Committee on Ways and Means H.R. 5638, the Permanent Estate Tax Relief Act of 2006. Here are some details:

• Increased Estate and Gift Tax Exemption: The Permanent Estate Tax Relief Act of 2006 would increase the exemption amount to $5 million per person effective January 1, 2010.
• Lower Estate and Gift Tax Rates: The Permanent Estate Tax Relief Act of 2006 would reduce the rate of tax on estates up to $25 million to the capital gains tax rate (currently 15 percent, set to increase to 20 percent in 2011 unless extended).
• The bill would reduce the rate of tax on estates of $25 million or more to twice the capital gains rate (currently 30 percent, set to increase to 40 percent in 2011 unless extended).

I continue to favor repeal of the estate tax, as Thomas probably does. But this bill is a good faith effort to find a compromise with those who hold the opposite view. This legislation could get the necessary 60 votes in the Senate and put an end to the tremendous uncertainty now surrounding the future of the estate tax.

Update: Today's Wall Street Journal reports on the Thomas bill. It includes this tidbit:

To appeal to a few key Senate Democrats, Mr. Thomas included incentives for the timber industry. The legislation includes a new 60% deduction for qualified timber capital gains.

It would be good for some journalist to figure out who those Senators are and to ask them why they think a special timber tax break is good policy.