NEW YORK (CNNMoney.com) – The future of the estate tax will occupy center stage this week when the Senate takes up legislation on Thursday calling for permanent repeal. The tax affects less than 2 percent of all estates. But the revenue it can generate makes deficit-hawks and those concerned with economic inequality reluctant to part with it.

Originally scheduled for a vote last September, estate tax repeal was pushed off the Senate agenda by Hurricane Katrina. Earlier in 2005, the House passed its own bill calling for permanent repeal.

ESTATE TAX TODAY Through 2010, estate tax law becomes more lenient until it is fully repealed for one year. Then it reverts to pre-2001 law. Year  Amount exempt  Top rate on taxable portion  2006  $2 million  46%  2007  $2 million  45%  2008  $2 million  45%  2009  $3.5 million  45%  2010  Estate tax repealed for one year  N/A  2011  $1 million  55%

Fewer estates get hit Since 2000, the percentage of estates subject to the estate tax has been on the decline. Year  Amount exempt  Estates subject to estate tax  2000  $675,000  2.2%  2003  $1 million  1.3%  2006  $2 million  0.5%  2009  $3.5 million  0.3%   Source:  Center on Budget and Policy Priorities

Quick Vote Estate taxes should be...   Permanently repealed   Scaled back but not repealed   Left alone   Not sure or View results

Those who support repeal contend, among other things, that the estate tax curbs incentive to invest and expand businesses. They also say it is an unfair burden on family businesses and farms, the heirs to which may be forced to sell pieces of the business just to pay the estate tax bill.

Those who oppose repeal contend it is far too costly in a time of high deficits and that there are already allowances for family businesses under current estate tax law.

There is serious doubt that Republicans will get the votes needed to overcome opposition. But they're hoping to garner enough support for a compromise proposal that would permanently raise the exemption level and lower estate tax rates.

But critics of repeal say that even the compromise proposals will be too costly, with the benefits of the legislation going to too few taxpayers.

In an interview with CNBC Wednesday afternoon, Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, said that he believes a majority of Republican senators would support a compromise deal, but that if that deal isn't decided on this week it is unlikely to happen before the mid-term elections in November.

The estate tax exemption level has been on the rise since enactment of the Tax Relief Act of 2001. As a result, the number of estates subject to the estate tax has fallen steadily, from 2.2 percent of all estates in 2000 to 0.5 percent this year. By 2009 it is projected to fall to 0.3 percent.

Meanwhile the top tax rate has been on the decline, from 55 percent in 2000 to 46 percent today, lessening the tax burden on heirs of very large estates.

Come 2010, the estate tax will be repealed entirely for one year. Then, barring changes by Congress, it is scheduled to be reinstated at its pre-2001 exemption level of $1 million with a 55 percent top rate.

The bipartisan Joint Committee on Taxation estimates the cost of permanent repeal in the 10-year period between 2006 and 2016 will be just over $369 billion. That assumes the estate tax as structured under current law will be in effect through 2009.

That calculation is far below the nearly $1 trillion price tag that the liberal Center on Budget and Policy Priorities (CBPP) estimates permanent repeal will cost. The estimate by the CBPP, which opposes repeal, reflects a 10-year period when repeal is in full effect. Between 2012 and 2021, CBPP estimates the repeal will cost $776 billion in lost revenue plus $213 billion in interest the federal government would pay on debt as a result.

The Wall Street Journal on Monday published an editorial alleging that permanent repeal would result in a net increase in revenue because of a little-discussed element in the law that goes into effect in 2010: heirs' loss of the full step-up in cost basis.

Currently if you inherit, say, stocks from your father, your cost basis for those stocks will be their value at the date of his death, not his cost basis when he bought the shares. So the only capital gains tax you would owe would apply to the gains that accrue between his date of death and when you sell the shares.

But the legislation calling for permanent repeal after 2010 also repeals the step-up in basis. So, in theory, when you sold the shares, your cost basis would date back to when your father bought the shares. That would translate into a higher capital gains tax bill for you, and hence more tax revenue for the government.

However, critics of the Journal editorial note, the loss of a step-up will be a non-issue for most heirs, because the law would also allow executors to increase the cost basis of any assets in any estate by up to $1.3 million. And they're allowed to add another $3 million to that if the beneficiary is the decedent's surviving spouse.

So effectively, most heirs would get their step-up in basis and not pay additional capital gains tax because whatever capital gains accrued during a decedent's lifetime would be covered by part of that $1.3 million (or $4.3 million if you're a spouse).

Given doubts about Republicans' ability to garner enough votes for repeal, three senators - Jon Kyl (R-Ariz.), Max Baucus (D-Montana) and Olympia Snowe (R-Maine) - have each floated compromise proposals that would establish a more lenient estate tax on fewer estates.

Kyl has proposed taxing only those estates over $5 million and imposing a flat tax of 15 percent, according to published reports. His spokesperson wouldn't comment, noting that "negotiations were still ongoing."

Currently, the taxable portion of an estate is subject to a tiered rate structure – meaning the first portion of the amount over the exemption level is taxed at 18 percent, the next portion at 20 percent and so on, up to today's top rate of 46 percent.

Baucus, whose office also wouldn't comment, has reportedly proposed taxing all estates over $3.5 million, retaining the tiered rate structure but reducing the number of rates to just three: 15 percent, 25 percent and, for estates over $10 million, 35 percent.

The CBPP, citing calculations from the JCT and the Urban-Brookings Tax Policy Center, estimates that Kyl's proposal would cost about 84 percent of the revenue that would be lost under permanent repeal, while the Baucus proposal would cost 74 percent.

Snowe, meanwhile, more recently proposed taxing only estates over $7 million, according to her spokesperson. Her proposal also maintains a tiered rate structure. The amount between $7 million and $10 million would be taxed at 15 percent; the amount between $10 million and $15 million at 25 percent; and anything over $15 million at 28 percent.

Cost estimates for the Snowe proposal were not available as of Tuesday afternoon.

The lower tax rates in these proposals more than the increased exemption levels are what would cause a sharp reduction in revenue, according to CBPP, which noted 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.

Given the country's deficits and the anticipated shortfalls in Medicare and Social Security, if estate tax revenue is eliminated or slashed, "you have to make up the revenue somewhere," said Len Burman, a senior fellow at the Tax Policy Center. One option, he noted, may be higher income taxes down the line.