Senate Passes Amendment to Reduce Estate Tax After Obama Blueprint Calls for Killing Cut

An amendment put up by Democratic and Republican senators to reduce the so-called "death tax" passed 51-48 Thursday evening, challenging the plan set forth by the president in his budget blueprint.

Under Obama's plan, the tax would have expired in 2010 and remained at its 2009 level -- meaning the government would get 45 percent of a dead person's estate valued over $3.5 million.

The amendment would reduce the estate tax rate to 35 percent and increase the exemption to $5 million.

Democratic Sens. Blanche Lincoln, Ark., and Ben Nelson, Neb., and Republican Sens. Jon Kyl of Arizona and Chuck Grassley of Iowa were among those backing the amendment, one of a flurry of measures meant to alter the president's plan.

In 2001 and 2003, Republicans helped push through President Bush's tax cuts that lowered the estate tax from 55 percent to 45 percent this year and would have eliminated them next year.

But supporters of Obama's proposal contend that keeping the tax rate at 45 percent in 2010 is still a break from the 55 percent and insist the federal coffers would take too much of a hit if Congress completely repealed the tax.

The amendments to the budget do not have the force of law, but are guidelines for committees that have jurisdiction over the policies in the amendments.

The Senate also unanimously agreed Thursday that no taxes should be raised on charitable contributions to pay for health care reform, sending a strong signal to those who will eventually write the tax legislation.

Obama had proposed to lower the tax deduction wealthy donors can claim for charitable contributions from 35 percent to 28 percent -- something a number of charities complain will lead to a drop-off in charitable giving.

FOX News' Trish Turner and Molly Henneberg contributed to this report.