House Democrats fail to push through estate tax change

The House late Thursday night rejected a move by Democrats to raise the estate-tax level, the last hurdle in clearing the $858 billion compromise tax package. 

The amendment failed 194-233, with one voting present and 60 Democrats and all Republicans opposing the amendment. The House passed the bill 277-148. 

The estate-tax amendment, offered by Rep. Earl Pomeroy (D-N.D.), would have provided a two-year extension, through 2012, of the 2009 tax levels, setting the rate at 45 percent with a $3.5 million exemption, or $7 million for married couples. 

The issue was one of the most contentious for House Democrats and jeopardized final clearance of the deal brokered by President Obama and congressional Republicans. 

Rep. Chris Van Hollen (D-Md.), the House Democrats’ chief negotiator on the tax deal, called the compromise "egregious" and said it would add $23 billion to the deficit while benefiting just 6,600 families, about 99.8 percent of the total. 

The agreed-upon tax package includes a 35 percent estate tax with a $5 million exemption, a concession to Republicans. That plan covers about 99.86 percent of households, with the remaining estates, about 3,600, taxed at 35 percent.

Last year, the House passed a bill that reinstated the estate tax to 2009 levels after it lapsed in 2010. 

The amendment also would have allowed decedents to be treated under the 2009 levels or under current law for tax purposes. 

The amendment would allow estates to receive a step up in basis on inherited property rather than the 2010 carryover basis rules. The exemption level and rate are consistent with the estate-tax proposal included in the fiscal 2010 and 2011 budgets.