Baucus, Grassley pledge doesn’t include estate tax extension

The Senate’s tax-writing committee will move to extend expiring tax
legislation early next year, but it’s unclear if that will include the estate
tax.
 
Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) on Tuesday sent a letter to Senate leaders announcing their intention to move a tax bill as soon as possible in 2010.
 
{mosads}Baucus and Grassley also engaged in a colloquy on the Senate floor that highlighted the letter, in which the two pledged to work together to get the extenders done.
 
The tax extenders had been included with the extension of the estate tax as a sweetener, so when the estate tax stalled in the Senate, so did the extenders.
 
The package of extenders would include the research and development tax credit as well as a biodiesel tax credit supported by Grassley that provides an incentive for the production of the alternative fuel.
 
The tax is scheduled to expire for a year beginning on Jan. 1, but would then go back into place at a higher maximum 55 percent rate in 2011.
 
The House approved legislation extending the existing maximum 45 percent estate tax through 2010, but the legislation stalled in the Senate after Republicans objected. That stalled the package of tax extenders, a high priority for the business community that draws support from both parties.
 
Baucus and Grassley did not mention the estate tax in their letter or colloquy, and it’s unclear if the omission means they would try to move the issues separately. Baucus has discussed passing an extension of the estate tax next year that would be retroactive, but it is uncertain whether a retroactive tax hike would pass constitutional muster.
 
Baucus believes both are priorities, and he will work with Grassley and others to determine the most appropriate path forward, according to a Senate aide.
 
In a floor statement on Tuesday, Grassley blasted Senate Democrats for linking the biodiesel tax credit to the estate tax.
 
“If the Senate Democratic leadership had not chosen to hold the tax extender package hostage in an attempt to force moderate Democrats and Republicans to vote for an estate tax bill that lacks support, the tax extender package would have easily passed separately,” Grassley charged.
 
One tax lobbyist said the fight could put Democrats in a compromising position. Since the estate tax is set to go back into effect in 2011, the party could now be portrayed as re-imposing the estate tax in 2011 because the tax will expire in 2010.