A senior member of the tax-writing House Ways and Means Committee has introduced legislation to roll back the estate tax rates to pre-Bush tax cut levels.

Jim McDermott

Rep. Jim McDermott, D-Wash., introduced the bill, known as the Sensible Estate Tax Act of 2011, on Thursday. The bill would bring the estate tax rates back to their pre-2001 levels of up to 55 percent, with a $1 million exemption for individuals, or $2 million for married couples. Both levels, however, would be indexed for inflation beginning in 2000. Under current law, the maximum rate is 35 percent, with a $5 million exemption, allowing over 99 percent of estates to escape taxes. According to a new study from the advocacy group Citizens for Tax Justice, only 0.3 percent of deaths in 2009 resulted in a federal estate tax liability in 2010.

“The U.S. economy and the American people are struggling through one of the worst recessions in our history,” McDermott said in a statement. “Now is the time to ensure our tax policy is fair and equitable for all Americans, and the estate tax bill that I am introducing today embodies these values.”

In addition to the tax rate changes, the legislation also includes a number of other estate tax reforms and provisions. The bill would re-unify and make permanent the portability for spouses of the gift and estate tax exclusions; restore the credit for state transfer taxes paid; close loopholes in the asset valuation and minority discount rules; provide for consistent basis reporting between estates and beneficiaries; require a minimum 10-year period for grantor retained annuity trusts; and provide meaningful limits to the generation skipping transfer tax exemption.

Bill Gates, Sr., father of the Microsoft chairman, expressed his support for the bill. “I welcome the introduction of this legislation, and I commend Congressman McDermott on his leadership in continuing the conversation for a fair and equitable estate tax,” said Gates. “I have long believed that individual wealth is only possible through the significant investment America makes in the lives of its citizens. An estate tax ensures that those who have benefited the most from this great country reinvest in the very promise of wealth and opportunity America provided them.”

Former investment banker Eric Schoenberg, a member of the advocacy group Responsible Wealth, also expressed his support, as did Responsible Wealth and another advocacy group, United for a Fair Economy.

“As a patriotic American who will be subject to the estate tax, I wholeheartedly support Congressman McDermott’s proposed bill to return estate tax rates to those that existed through 2000,” he said in a statement. “Given the obvious need for significant steps to get the United States' fiscal house in order, I think it is perfectly reasonable to ask the wealthiest Americans to be the first to sacrifice, and particularly fitting that we should contribute to the public welfare at the same time that we are contributing to the private welfare of our heirs.”