Congress is likely to finish work this year on setting a permanent estate tax, Sen. Chuck Grassley (R-Iowa) suggested Thursday. 

Grassley, the ranking member of the Senate Finance Committee, suggested that Congress is likely to settle on an estate tax rate this year, and exempt up to $3.5 million of estates from taxation.

"If we go back to a million-dollar estate tax exemption, which is going to happen Jan. 1, we're going to be selling a lot of farm land to pay estate taxes," Grassley told AgWired. "And even at  $3.5 million dollars, which I think is where we're going to end up, it's still going to be detrimental to some family farmers. But I think that's where we will end up, and I think we'll do it before the end of the year."

The estate tax lapsed at the beginning of 2010, but is set to spring upward to 55 percent at the beginning of 2011 (with a $1 million exemption) unless Congress acts. Democrats in the House passed a bill in 2009 to make the 2009 rates permanent, which would set the rate at 45 percent with an exemption of up to $3.5 million. 

While Grassley didn't say at which rate the Senate is likely to settle, he and other farm-state senators have fought to carve out family farms, properties that are often passed down through estates, from the taxes. Other Republican senators, like South Carolina Sen. Jim DeMint, have meanwhile sought to permanently end the estate tax — which he derides as a "death tax" — entirely.

Republicans have made the various taxes set to spring upward at the end of the year a key part of their election-year attacks against Democrats. Along with the estate tax, income-tax rates will rise to the rates they'd been at preceding former President George W. Bush's tax cuts. 

GOP leaders have pressed to extend all of those tax cuts, while Democrats have said they want to let the rates rise for top earners while extending the rest of the cuts. House Republican Conference Chairman Mike Pence (Ind.) suggested Wednesday night that extending all of the tax cuts would be a top priority for Republicans if they retake the House next year.

Grassley said, though, that lawmakers had no choice but to try and act this year.

"Sen. Reid sets the agenda for the United States Senate. He said that we're going to be on taxes a couple weeks during September," he said. "I think it's driven mostly by the income tax expiring at the end of the year, so we get the biggest tax increase in history of the country if Congress doesn't act. So I think Congress has to act."