By a vote of 230 to 180, the House early on July 29, 2006, passed the Estate Tax and Extension of Tax Relief Bill of 2006 (HR 5970). The bill seeks to resolve the current uncertainty in estate tax planning by creating a $5 million individual estate tax exclusion, increased to $10 million for couples, with portability between spouses. Estates up to $25 million would be taxed at capital gain rates (current maximum 15 percent), while larger estates would be taxed at rates of up to 30 percent.
Also included in the legislation is a package of nearly two dozen extensions and expansions of various tax provisions, many of which had expired at the end of 2005, including the research tax credit, the deduction for state and local sales taxes, the deduction for qualified tuition and fees, the welfare-to-work and work opportunity credits, the deduction for leasehold improvements, the deduction for teachers’ out-of-pocket expenses, and the deduction for charitable contributions of computer equipment.
In an effort to try to attract the votes of Democrats and moderate Republicans, the legislation also incudes an increase in the minimum wage from $5.15 to $7.25 over three years.
The Senate is expected to take up the legislation in the coming week prior to its adjournment for the August recess. It is not clear if the minimum wage provision and extenders package will attract enough Senators who in the past have opposed the estate tax relief provisions to secure Senate passage. Senators concerned about the deficit may also focus on the estimated $300 billion cost of this legislation over ten years, with $268 billion of that cost associated with estate tax relief.