Obama, Republicans split the difference on estate tax rates

In passing a tax bill to forestall the "fiscal cliff" — the overnight rise of a wide array of taxes combined with deep spending cuts — lawmakers agreed to revise rates and exemptions for the estate tax.

During the 2008 presidential campaign, Barack Obama promised to exempt the first $3.5 million in value from the estate tax and impose a top rate of 45 percent. When the fiscal cliff deal was negotiated, Obama had to compromise a bit on those numbers.

In the fiscal cliff bill, passed by the House and Senate on Jan. 1, 2013, the top tax rate was set at 40 percent — halfway between Obama's pledge and the reported 35-percent rate favored by some Republicans — and estates smaller than $5 million will be exempted. Going forward, that $5 million limit will be indexed for inflation. (During the Clinton years, the estate tax was 55 percent.)

Given that both the White House and Congressional Republicans had to give ground on rates, we classify this as a Compromise.