July 21, 2010 / 1:39 AM / 9 years ago

CORRECTED - Rubin, Robertson want U.S. estate tax reinstated

(Corrects to remove reference to Kyl, Sanders, McDermott participating in Wednesday press conference, paragraph 9)

By Joseph A. Giannone

NEW YORK, July 20 (Reuters) - Former U.S. Treasury Secretary Robert Rubin and Tiger Management founder Julian Robertson have joined a growing chorus calling for the U.S. estate tax, which expired last year, to be reinstated by Congress before its August recess.

The recent death of New York Yankees boss George Steinbrenner helped shine a spotlight on an unprecedented situation: millionaires and billionaires who die in 2010 can pass on their fortunes to heirs without any estate tax, thanks to the expiration of 2001 Bush tax cuts followed by a year of Congressional inaction.

Now a group that includes formerly Goldman Sachs co-head Rubin, hedge fund pioneer Robertson and Walt Disney heir Abigail Disney are calling on Congress to reinstate the estate tax before the August recess. These three, along with AFL-CIO President Richard Trumka will speak at a Wednesday press conference.

The estate tax, which was reduced in 2001 by the Bush Administration, expired at the end of last year. It has not yet been replaced amid debate over how high the bar should be set for exemption and how steep the rate should be.

A number of very rich Americans have died this year and, unless an estate tax is imposed retroactively, will pay zero tax. Wealth management executives privately say that with each passing week, the odds get better these fortunes will never be taxed.

Last week Senator Blanche Lincoln, a Democrat, and Senator Jon Kyl, a Republican, reintroduced a proposal to reinstate the estate tax, applicable to fortunes of more than $5 million at a rate of 35 percent starting next year.

Also last week, Senate Finance Committee Chairman Max Baucus questioned whether the U.S. could afford to extend tax cuts for the wealthy.

It was not known if press conference organizer United for a Fair Economy, a Boston nonprofit organization opposed to concentrations of wealth, will seek a retroactive tax.

The Bush plan that expired last year had taxed estates at a rate of 45 percent, above an exemption of $3.5 million for individuals and above $7 million for couples.

There is no estate tax in 2010 because lawmakers last year failed to reach a deal to extend the tax. The House of Representatives last year had passed an extension of the 2009 rates, but senators clashed over the level of the tax.

Without action, the tax rate will rise to 55 percent, with an exemption level of $1 million, in 2011. (Reporting by Joseph A. Giannone; Editing by Tim Dobbyn)

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