The Senate voted to extend portions of the current tax laws and the focus of those particular extensions is on the estate tax. The Democratic sponsored bill would extend the tax cuts until 2013 for those making less than $250,000 per year. Those earning more would see the cuts revert back to 2001 levels.
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The estate tax was left out of the bill and is now the focal point of concern regarding the fiscal cliff. Estate taxes currently are at 35% with a $5 million exclusion. If allowed to revert back to 2001 levels, the tax will increase to 55% and the exclusion will be only $1 million.
Some senators say that allowing the estate tax to revert would put many small businesses and farms out of business.
The bill passed in the Senate on Wednesday also set the capital gains tax at 20% across the board. For those making above the $250,000 annual income threshold, capital gains would be taxed as ordinary income.
Those who opposed the bill say it has no chance of passing in the House. Another bill
written by Rep. Kevin Brady (R-TX) eliminates the estate tax altogether. Brady says he already has the 218 co-sponsors needed for a House majority.
He says elimination of the estate tax would help small businesses and farmers and would stimulate growth in the economy.