Estate Tax Gets Lost in the Fiscal Shuffle Like so many other provisions of the tax code, estate taxes are caught up in the tangle of competing proposals in the rush to a year-end resolution of the nation's fiscal crisis. Absent an agreement before the end of the year, inheritance taxes are scheduled to jump significantly in 2013, potentially drawing in tens of thousands of estates that would otherwise escape taxation. Starting Jan. 1, estates would be allowed to pass on to heirs only $1 million free of taxation, and the top effective tax rate on inheritance would rise to as much as 60 percent. This year, in contrast, the exemption from taxation is a bit more than $5 million per decedent, and the top rate on taxable estates is just 35 percent. Such a big tax increase may be unlikely, as most Republicans and many Democrats staunchly oppose the taxation of family wealth as it passes between generations and would most likely seek at the least to temporarily extend the current, relatively generous provisions pending a broader review of tax policies. If there is a compromise, it is impossible to know its terms yet. President Obama has suggested taking the estate tax back to where it was in 2009. That represents a middle ground, exempting inheritances up to $3.5 million ($7 million from a couple) and taxing the remainder at up to 45 percent. The Senate passed legislation in July that would extend Bush-era tax cuts for incomes under $250,000, and Democrats, as well as some Republicans, are pressing the House to simply take up that bill, pass it and send it to Mr. Obama. But the Senate bill is silent on the estate tax. So even if the House passes the Senate tax bill, the estate tax issue would remain unresolved. On Tuesday, a group of wealthy individuals, liberal policy experts and advocates of a progressive tax system called for something considerably stiffer than the Obama plan, but not as tough as what is scheduled to happen after the first of the year. The group, called the Responsible Wealth Project, proposed that the exemption be set at $4 million per couple ($2 million per decedent), with steadily escalating taxes starting at 45 percent, raising even more money from the extraordinarily wealthy. Taxes on estates have varied widely for more than a decade. In 2001, Congress voted to phase out the estate tax and repeal it entirely in 2010. Ultimately, the tax was reinstated in the 2010 tax act, with an exemption starting at $5 million that could be doubled by a couple to pass on $10 million without taxation. The top rate was set at 35 percent. But that was a temporary fix, and its time is about to run out, exposing thousands to the prospect of higher taxes. Under differing formulas, the amount of estate taxes collected over the next decade could swing by tens of billions or even hundreds of billions of dollars. Whether the biggest benefits of estate tax relief go to the very wealthiest or to relatively modest estates depends on whether any new formula focuses on expanding exemptions or lowering tax rates. Higher exemptions focus the benefits on people inheriting relatively smaller estates, many of whom would owe no tax at all, while saving relatively little for people with the largest estates, which would pay tax on most of their wealth. Cuts in the top marginal tax rates, by contrast, could save the wealthiest heirs many millions of dollars. So the fight, like the rest of the argument over a fiscal solution, is on two battlegrounds - how much revenue does the federal government need to collect, and from whom should it be collected?