Now that both the House and Senate are in Democratic hands I think it’s safe to say that estate tax repeal is a dead issue, a view shared by USA Today among others (see also here).  What does have a fighting chance is estate tax reform that excludes most taxpayers while retaining most of the revenue currently generated by the tax, as reported in the USA Today piece:

While Democrats have opposed full repeal of the estate tax, many support increasing the exemption amount, says Clint Stretch, managing principal of tax policy at Deloitte Tax in Washington. Rep. Charles Rangel, the New York Democrat who’s expected to chair the House Ways and Means Committee, favored estate tax reform as far back as 2001, Stretch notes. "Clearly, he would be supportive of a significant increase in the exemption amount."

Here’s how a leading Democratic reform proposal was described in June 2006 in Estate tax reform not dead, despite vote:

Many Democrats may be amenable to raising the exemption level, but far fewer seem to be in favor reducing the tax rates, due to concern over how much revenue would be lost. The tax rate, not the exemption level, is what would cause the sharpest reductions in revenue, according to the liberal Center for Budget and Policy Priorities.

The latest proposed compromise comes from Sen. Tom Carper (D-Delaware). He offered an amendment to the repeal bill that would freeze the estate tax at 2009 levels: specifically, a $3.5 million exemption at a top rate of 45 percent.

The Urban-Brookings Tax Policy Center estimates that if the 2009 estate tax provisions were made permanent ($3.5 million exemption with a top rate of 45 percent) that would protect the smaller estates that otherwise would be subject to estate tax under pre-2001 law, and it would cost 60 percent less than permanent repeal.

If the estate tax were frozen at 2009 levels, only 0.3 percent of all estates would have any tax liability, according to CBPP.

My prediction:

Estate tax will be frozen at 2009 levels: $3.5 million exemption at a top rate of 45 percent.  By the way, this is reportedly the estate-tax reform approach favored by none other than Rep. Rangel himself:

Mr. Rangel has also supported estate-tax relief that would raise the exemption level to $3.5 million ($7 million for couples), thus exempting an estimated 99.7 percent of Americans from paying the so-called death tax.

See What Charlie Rangel hasn’t said