But wait, there's more

The new estate tax reform bill introduced in the House, H.R. 5638, the Permanent Estate Tax Relief Act of 2006, sets the estate tax rate for estates of up to $25 million equal to the rate on long-term capital gains. For most of the revenue-scoring window, that will be 20%. For amounts above $25 million, the rate doubles, to 40%. When you consider that under the new law revenue will be collected during 2010, compared to no collections under current law, the "cost" of this reform should be modest.

Another revenue raiser: Back in 2001 the credit for state death taxes was converted to a deduction, which had the practical effect of passing most of the "revenue cost" of the estate tax reductions down to the states. About half of the states no longer collect death taxes, as a result of the change. The proposed law eliminates the deduction for state taxes also, after 2009. The old credit is not restored, and IRC Sec. 2011 (which included the table for calculating the state death tax credit) is deleted as "deadwood." Also deleted as deadwood, IRC Sec. 2057, the paltry relief offered to small businesses that's already been overshadowed by larger exemption amounts.

More good news: The estate and gift taxes will be reunified. That means that beginning in 2010 the federal exemption for gift taxes jumps to $5 million, from the currently scheduled $1 million. So the tax disincentive for lifetime execution of estate planning strategies will be abolished.