Estate Tax Fight Shifts To Senate

Lawmakers and lobbyists pressing for an end to the federal estate tax hope newly elected Senate Republicans give them the votes they need to terminate what opponents of the levy call the "death tax."

Talks between Republicans and Democrats have just begun in the Senate, where some lawmakers have worried about increasing federal deficits. Estate tax repeal's top proponent, Sen. Jon Kyl, R-Ariz., refused to predict an outcome.

"We are working to see what the best approach is, and I'm not going to speculate," Kyl said.

Others signaled strong hopes that this year their fortunes have changed.

"We're very optimistic," said Ryan Peebles, senior manager of legislative affairs at the National Federation of Independent Business.

The House voted 272-162 on Wednesday to repeal the federal estate tax in 2010 and beyond. The legislation would prevent the estate tax from re-emerging after its scheduled elimination, for one year, in 2010. Previous bills passed by the House have languished in the Senate.

House lawmakers who voted to eliminate the tax said it burdens small businesses and farms, often forcing families to liquidate enterprises to cover the cost.

"We all realize that the government must have revenues and that taxes are a necessary evil," said House Speaker Dennis Hastert, R-Ill. "But this tax isn't necessary. It's just evil because it takes away the American dream from too many American families."

House Majority Leader Tom DeLay, R-Texas, called the levy "immoral" and the vote to terminate it a signal that Republicans had shifted the debate over taxes.

"We no longer ask how much we should raise taxes but how much we should cut them," he said.

Many Democrats challenged the bill's $290 billion, 10-year cost as too costly for a country burdened by deficits and fighting terrorism at home and abroad. They said the bill benefits a few wealthy families to the detriment of almost everyone else.

"This is the reverse Robin Hood," said House Minority Leader Nancy Pelosi, D-Calif. "We are taking money from the middle class and giving it to the super rich, and not only the super rich but the super, super, super rich."

Most estates already are exempt from federal taxes. The Internal Revenue Service said just over 2 percent of people who died in 2001 left estates subject to taxation.

Democrats lost in their bid to pass a $70 billion alternative that would quickly increase the size of estates that are exempt from the tax but would leave the tax in place for the wealthiest estates. It was rejected by a 238-194 vote.

Current laws gradually increase the size of an estate exempt from tax and decrease the top tax rate before complete repeal in 2010.

This year, estates worth up to $1.5 million for an individual or $3 million for a couple owe no tax. The top tax rate stands at 47 percent. Just before its complete repeal, in 2009, the exemption increases to $3.5 million for an individual or $7 million for a couple. The tax rate falls to 45 percent.

The Democratic plan would have increased the exemption, starting in 2006, to $3 million for an individual and $6 million for a couple. The exemption would increase in 2009 to $3.5 million for an individual and $7 million for a couple, the same levels as under current law.