WASHINGTON — As part of the compromise reached between President Obama and Republican leaders in Congress that would extend the Bush-era tax cuts for another two years, the estate tax would return in 2011 at a 35% rate and a $5 million exemption.
Separately, the Food and Drug Administration Food Safety Modernization Act was reintroduced as part of a budget bill in the House after it had been hung up on a procedural technicality. It passed the House 212-206 and was expected to pass the Senate again.
The estate tax — a levy on inherited wealth that is of concern to many family-owned supermarket operators — expired at the end of last year but was slated to return at a 55% rate in 2011 with a $1 million exemption.
The overall tax agreement also could include additional tax breaks for businesses, such as a proposal for companies to write off 100% of their investments in plants and equipment in 2011. The tax reforms were paired with a two-year extension of unemployment benefits, which also has the support of the retail industry.
The tax proposal has yet to pass through Congress, where many Democrats oppose elements of it that are beneficial to wealthy individuals. Late last week the Democratic caucus in the House voted against the tax package, but reports said it could still pass on the House floor. It was also expected to face some Democratic opposition in the Senate.
Retail groups supported the overall tax-reform proposal.
“The president's proposal to extend the estate tax for two years at a favorable 35% rate with a $5 million exemption is a good start,” said Peter J. Larkin, president and chief executive officer, National Grocers Association. “While NGA's members will continue to advocate for full repeal of this onerous tax, we are committed to working with Congress to pass this temporary measure to provide relief and certainty to thousands of family-owned businesses, which will be devastated should the estate tax return to pre-2001 levels.”
Leslie G. Sarasin, president and CEO of FMI, also called on Congress to pass the tax legislation: “We applaud the bi-partisan agreement reached by the White House and Congressional leaders, which provides a solid framework that will benefit families and small businesses of all income levels, especially during these difficult economic times. The proposed package will also provide certainty to companies facing important operating decisions for the coming year.”
“Extending the cuts on a temporary basis is a prudent move that will allow our economy to regain stability,” said Matthew Shay, president and CEO, National Retail Federation. “Many of the ‘wealthy’ taxpayers who will benefit from this agreement are small-business owners whose business income is taxed as personal income and who are working every day to create jobs.”