It comes as no surprise that the Republican gains on November 2 have created pressure for lower taxes. Surviving Senate Majority Leader Harry Reid is already waiving a white flag. Having previously spoken out strongly in favor of increasing taxes, especially for the wealthy, he was quoted today as saying that he “will take a look at” extending the Bush-era tax cuts that were embodied in the 2001 tax relief act known as EGTRRA. Additional analysis of Senator Reid’s statement is available in this Reuters report.
The gradual reduction of the Federal Estate Tax was also part of EGTRRA, culminating in a one year elimination of the tax in this year of 2010. Logic suggests that Congress will have no choice but to revisit the Federal Estate Tax before the end of the year. Otherwise, the exemption amount will drop from unlimited to $1 million, drastically increasing the number of taxable estates. But no one ever said that logic governs politics in Washington, and the pressure to deal with the income tax could overshadow the need to address the estate tax. We’ll keep on eye on this.