Talks advance on estate tax

Lawmakers are looking to give taxpayers the option of prepaying their estate tax, sources close to the issue told The Hill. 

If taxpayers choose to this option, payments would be at a lower tax rate than if made after death. 

It is currently unclear what the lower rate would be for prepayments. 

The tax for estates would be set at 35 percent for those worth more than $3.5 million, but the exemption would ultimately increase over time to $5 million and would not be indexed for inflation.

Providing taxpayers with a prepayment option and lowering the estate tax to 35 percent has been discussed for months, but sources said conversations on the matter turned a corner after lawmakers learned the proposal would less expensive as originally expected. 

The proposal's official cost is unknown, since it hasn't been scored and lawmakers have yet to ink the deal. However, a potential payfor for it could be placing limits on Grantor Retained Annuity Trusts (GRATs). One issue with using measure is the House-passed small business jobs bill includes a similar provision. 

The estate tax is currently repealed, but barring congressional action it returns next year to pre-2001 levels by socking estates worth more than $1 million with a tax that tops out at 55 percent. Republicans and more than a few Democrats oppose this level of taxation.