After Sen. Jon Kyl (R-AZ) agreed to withdraw an amendment to cut the estate tax, Senate Finance Committee chair Max Baucus (D-MT) promised a committee mark-up of Kyl's amendment next spring. Kyl's amendment would have exempted all estates under $5 million (up from the current $2 million exemption), taxed those between $5 million and $25 million at 15 percent, and taxed those over $25 million at 30 percent. A very similar amendment failed to get cloture by a margin of three votes last year. With a net gain of seven Democratic members of the Senate since then and PAYGO rules now in place, it is not immediately apparent that the Kyl amendment has any realistic hopes of passage. But the Senate must act before 2010, when the estate tax is scheduled for repeal under current law, or it will be restored in 2011 -- for estates worth more than $1 million at a 55 percent rate, the 2001 levels. This means that a reduction in the estate tax rate schedule to go into effect in 2011 will need to comply with PAYGO, while the 2001 levels would not. ... During the course of the Finance Committee's mark-up of the farm bill tax title, Sen. Kyl made a brilliant observation. Baucus proposed a PAYGO-pay-for that would clarify a standard that federal courts follow in penalizing companies taking advantage of tax shelters that don't result in a real economic benefit to the corporation but merely provide a tax savings -- the long-standing "economic substance doctrine." Smelling a rat, Kyl remarked: I think the whole point of this is to raise revenue. When reminded that he serves on the Senate Finance Committee, Kyl looked stricken with shame and practically asked for his money back.