Estate Tax Update

WASHINGTON -- House Majority Leader Steny Hoyer (D., Md.) said Tuesday he supports a move to permanently fix the estate tax at 2009 levels and expects it will be adopted by Congress before the end of the year.

The staff on the tax-writing Ways & Means Committee is working on legislation that would set the rate of the tax at current levels.

The House legislation would continue the 2009 estate tax parameters indefinitely. It would exempt estate wealth under $3.5 million, or up to $7 million for a married couple, and tax inheritances above that amount at 45%.

If Congress does nothing, the estate tax would be repealed for one year in 2010. It would then snap back in 2011 to levels not seen since before President George W. Bush signed landmark tax legislation in 2001. That rate would only allow a $1 million exemption and charge any income over that amount with a 55% levy.

The extension would cost the taxpayer $233 billion over the next decade, because currently the federal budget assumes the rate will increase sharply from 2011.

The House measure would attach language requiring implementation of pay-as-you-go budget rules for most other mandatory spending. The Senate opposes this effort, which could set up an end-of-year battle between House and Senate lawmakers.

Some lawmakers are advocating a more generous exemption, lifting the threshold to $5 million for individuals and lowering the effective rate charged to 35%.

Write to Corey Boles at corey.boles@dowjones.com and Martin Vaughan at martin.vaughan@dowjones.com