Senators Sanders (I-VT), Harkin (D-IA), and Whitehouse (D-RI) got together to introduce a reasonably progressive estate tax proposal in the Senate. The Responsible Estate Tax Act (S.3533) is the first decent estate tax bill has seen the light of day in the upper chamber in quite a while. See our action alert in support here, and call your Senator to get them on board with this positive step for the estate tax.

On the major points, exemption and rates, the bill is mixed. The exemption would be set at $3.5 million ($7 million per couple), which is a bit higher than ideal but is the same as President Obama's proposal and the exemption in the bill passed by the House last year. S.3533 does quite a bit better than the Obama / House approved plan on the rates. The rates, in fact, are what makes the bill truly worthy of support. The bill includes a progressive rate structure from 45-55% percent and an additional surtax on estates valued over $500 million ($1 billion per couple). The progressive rates in this bill are genuinely praiseworthy.

Under the Responsible Estate Tax Act 99.7% of Americans would owe no estate tax at all.

Some more detail:

• Exempts the first $3.5 million of an estate from federal taxation ($7 million for couples), the same exemption that existed in 2009. Doing this would mean that 99.75 percent of all estates would be exempted from the federal estate tax in 2011 alone.
• Includes a progressive rate structure so that the super-wealthy pay more. The rate for the value of the estate above $3.5 million and below $10 million would be 45 percent, the same as the 2009 level. The rate on the value of estates above $10 million and below $50 million would be 50 percent, and the rate on the value of estates above $50 million would be 55 percent.
• Includes a billionaire's surtax of 10 percent. The bill also imposes a 10 percent surtax on the value of an estate above $500 million ($1 billion for couples). According to Forbes Magazine, there are only 403 billionaires in the United States with a collective net worth of $1.3 trillion. Clearly, the heirs to these multi-billion fortunes should be paying a higher estate tax rate than others.
• Closes all of the estate and gift tax loopholes requested in President Obama's Fiscal Year 2011 budget.These loophole closers include requiring consistent valuation for transfer and income tax purposes; a modification of rules on valuation discounts; and a required 10-year minimum term for Grantor Retained Annuity Trusts (GRATS). OMB has estimated that closing these loopholes that benefit the super-wealthy, would raise at least $23.7 billion in revenue over 10 years.
• Protects family farmers by allowing them to lower the value of their farmland by up to $3 million for estate tax purposes. Under current law, the value of farmland can be reduced up to $1 million for estate tax purposes under 2032(a) of the Internal Revenue Code (Special Use Valuation). The bill increases this level to $3 million and indexes it to inflation.
• Benefits farmers and other landowners by providing estate tax relief for conservation easements. The bill provides tax relief to farmers and other landowners by amending estate tax rules for conservation easements through an increase in the maximum exclusion amount to $2 million and increasing the base percentage to 60 percent.