The Budget Brigade has learned that Sen. Bernie Sanders (I-VT), along with Sens. Tom Harkin (D-IA) and Sheldon Whitehouse (D-RI) as co-sponsors, will soon introduce the "Responsible Estate Tax Act." While the bill would essentially reinstate the estate tax at 2009 levels – exempting the first $3.5 million of an individual's estate ($7 million for couples) – it has a more progressive tax rate structure that targets the wealthiest one quarter of one percent of the population, and protects small businesses and family farms.

In a "Dear Colleague" letter sent around yesterday in search of more co-sponsors, the senators pointed out the merits of the bill. The federal government will tax the value of an estate between $3.5 million and $10 million at a 45 percent rate – the same as 2009 – but will tax the value of an estate above $10 million at a 50 percent rate, and any value above $50 million at a 55 percent rate.

There is also a "Billionaire's Surtax" that adds 10 percent on top of the 55 percent rate on the value of any estate worth more than $500 million ($1 billion for couples). Additionally, the legislation would close all of the estate and gift tax loopholes singled out by the administration in their FY 2011 budget request.

In an effort to bring Democratic senators from the West back on to the majority's estate tax push, the bill includes carve-outs for farmers and large land-owning ranchers by upping the monetary limit of farmland reevaluation from $1 million to $3 million. As the "Dear Colleague" letter points out, only 80 small businesses and farms paid an estate tax in 2009, representing 0.003 percent of all estates, and this legislation would reduce that number even further.

Importantly, all of these provisions would be retroactive. Meaning the federal government would be able to recover the $14.8 billion the Joint Committee on Taxation has projected it will lose this year because of the absence of an estate tax.

While the Responsible Estate Tax Act provides a higher exemption than OMB Watch has advocated for in the past, the bill, which includes a progressive tax rate structure – most notably the billionaire surtax – is the most reasonable estate tax legislation to come out of Congress in a long time.

Image by Flickr user Daniel Y. Go used under a Creative Commons license.