Thursday, December 16, 2010

House votes today

Tax Notes ($) is reporting that the House first will vote on an amendment to the tax bill that reduces the estate tax exemption to $3.5 million and boosts the rate to 45%.  A simple majority will be needed to pass the amendment.  Whether or not the amendment passes, the House will then almost certainly pass the entire bill.

However, if the House does succeed in changing the terms of the estate tax fix, the bill must go to a very uncertain future in the Senate.  The odds are high that, coupled with all the "Christmas tree ornaments" that the Senate already accepted in the bill (restoration of ethanol credits, for example), as well as the emerging opposition to the bill on the right, the legislation instead will be kicked into 2011.

Notice that there's no longer any comment about the "cost" of these changes, because the estate tax is such a puny revenue generator.  What's more, most of the dollars come from estates of $20+ million, which will remain taxable.  This is all about the show and appeasing the base. 

All this past year, a bipartisan group headed by Kyl and Lincoln begged Congress to consider a plan to phase in a $5 million exemption and 35% rate over ten years.  The Democratic leadership rejected that legislation, refused to allow a vote, and the result may be the elimination of the phase-in element of the plan.

You'll recall that when it came to final passage of Obamacare, the House was forced to bend to the Senate's will because Ted Kennedy died and Scott Brown took his seat.  In that case, side legislation was enacted to overcome the House's main problems with the bill.  Here again, the House may be forced to accept the Senate-crafted compromise.

Blue dog Democrats would be expected to vote for no change in the bill, as would those Democrats who remain loyal to the President.  However, the wild cards are those who are retiring or who lost the election, who can vote without worrying what their constituents think.

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