The National Association of Manufacturers yesterday sent a “Key Vote” letter to the House urging a no vote on H.R. 4154, which would make permanent the current estate tax rate of 45 percent with a $3.5 million exemption. (See yesterday’s blog post, “NAM Opposes House Bill to Set Permanent High Rate for Death Tax.”

Fox News anticipates today’s House vote in the report, “Lawmakers Race to Extend Reduced Tax on Large Estates.” Supporters of the bill or an even higher tax rate emphasize the relatively small number of estates affected by the tax, about a quarter of 1 percent of all estates. We doubt those percentages comfort the many small, family-owned manufacturing companies affected by the tax: “Yeah, tough luck. You just happen to be one of the few punished for your success.”

In addition, as the NAM letter argues, the estate tax diverts investment from more productive uses:

For small and medium-sized manufacturers, owners and families, the estate tax is more than a one-time tax. In a recent survey of the NAM’s small and medium-sized manufacturers, respondents said that, on average, they spend $94,000 annually on fees and estate-planning costs in preparation for their estate tax bill. This is money that could have been used to grow businesses and add jobs.

More …

• Dow-Jones reports, “US Business Groups Split Over Estate-Tax Efforts.” True enough, but the differences are based mostly on tactical considerations as groups weigh several questions: What is realistically achievable in the current Congress, and would it improve the chances of more relief to let current law stand, leading to the tax’s full elimination in 2010 followed by its return in full force of 55 percent in 2011.
• NACS (the convenience store association), “NACS Urges Estate Tax Relief With Compromise Bill“: “NACS supports estate tax repeal. However, it does not support H.R. 4154, the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009, because it quite simply is an incomplete solution to adequately removing this tax burden on family-owned and -operated convenience and petroleum retail operations. …Instead, NACS is asking members to consider an alternative measure, H.R. 3905, which would better protect small businesses by providing an exemption level of $5 million per person and a rate of 35 percent.”
•  National Cattlemen’s Beef Association, “NCBA Opposes House Proposal To Extend Current Estate Tax Law“: “The Pomeroy bill is a disservice to America’s family farmers and other small businesses,” said NCBA President Gary Voogt. “By keeping a flawed law in place, Congress will simply extend our problems with the current system into the future.”The Washington Post editorial page dismisses compromise legislation as “a travesty.” That’s overblown and offensive. Legislators who believe business owners and farmers should not be punished for successful lives are not committing “a travesty.” They’re supporting investment, jobs and free enterprise.
•  National Federal of Independent Business letter calling H.R. 4154 an “incomplete solution” and expressing support for H.R. 3905.

House Majority Leader Steny Hoyer has released the floor schedule for next week. Look for debate to start Wednesday on H.R. 4154, the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses.

The bill would continue as permanent this year’s $3.5 million exemption from the death tax and a permanent top tax rate of 45 percent. Under current law, the estate tax falls to 0 in 2010 and then kicks back up to its previous, damaging level. As the American Farm Bureau explains: “When this happens, stepped-up basis will be limited to $1.3 million per person plus an additional $3 million for property passed to a surviving spouse. After 2010, the exemption will shrink to $1 million a person and the top rate will rise to 55 percent and full step up in basis will be reinstated.”

The National Association of Manufacturers is part of the Family Business Estate Tax Coalition, which urges a permanent rate. In a September 24 letter to the Senate, the coalition argued:

The FBETC is on record this year supporting the Lincoln/Kyl estate tax amendment that passed the Senate floor with a majority of votes during the budget proceedings. This amendment would provide family businesses with certain and permanent relief by reducing the top rate to 35 percent and increasing the exemption to $5 million. Such relief is critical for family businesses at a time when they are struggling to expand their businesses and create much needed jobs.

A House version is H.R. 3905.

So, House bill:

• $3.5 million exemption, 45 percent top tax rate

Preferable bill, which encourages investment and job creation:

• $5 million exemption, 35 percent top tax rate.