Sen. Jon Kyl (R-AZ) said yesterday that he continues to hold conversations with Finance Committee ranking member Max Baucus (D-MT) regarding specific parameters of possible estate tax reform. According to reports, it is likely the Senate will vote on a compromise before the end of August. While many senate Democrats feel pressured to negotiate on the estate tax before the mid-term elections, the specifics that Kyl is discussing could severely gut the tax. Kyl has made it known that he is in favor of an $8 million exemption level, and has also expressed support for instating a ten-year pay period. Concerning the tax rate, Kyl has said it would be best if it were tied to the capital gains rate (currently 15 percent although it is slated to revert to 20 percent in 2008). The Urban-Brookings Tax Policy Center estimates that this exemption, coupled with the low tax rate, would reduce estate tax revenue by 93 percent overall. In that sense, the reform would be little better than outright repeal. Not only would a lower the tax rate significantly reduce the amount of revenue brought in by the estate tax, but it should also be viewed as a possible back-door attempt to do away with the estate tax altogether. If the capital gains tax rate were ever brought down to zero, the estate tax would effectively be eliminated. To read more on this, see the Watcher article, "Rhetoric Heats Up On Estate Tax as Political Reality Pushes Compromise," as well as the CBPP report, "Kyl Estate Tax 'Compromise' Proposal Extremely Costly; True Cost Likely to be Masked."