Estate Tax Not Dead Yet

The House passed legislation that would permanently abolish estate taxes, but the bill faces long odds against winning support in the Senate.

"I don't think they have the votes to repeal," said Senate Minority Leader Tom Daschle. Democrats would have supply some votes if Republicans are to pass the bill in the narrowly divided Senate.

Republicans lobbying for passage agreed, observing that supporters do not have the 60 votes needed under Senate budget rules. This measure also passed the House last year only to die in the Senate.

"I think they'll end up with 56 votes on this," said Stephen Moore, president of the conservative Club for Growth. "The Senate is always the holdup on this."

Without a bill to permanently repeal the estate tax, it will disappear in 2010 only to reappear a year later. The anomaly is the result of a 2001 law that gradually reduced the tax rates on inherited estates and repealed the tax as of 2010. Senate rules designed to limit budget deficits forced lawmakers to make the repeal expire in 2011.

The House voted 264-163 on Wednesday to make the repeal permanent.

Lawmakers turned back a Democratic attempt to retain the tax on the country's largest estates. They voted 239-188 to reject a Democratic alternative that raised the exemption beginning next year to $3 million for each individual and $6 million for married couples.

Republicans said the tax must be fully repealed to protect families who own small businesses and farms and prevent their heirs from liquidating their enterprises to pay their tax bills. They also pointed to the time and money spent on estate planning.

"The country was built on family businesses," said House Majority Leader Tom DeLay, R-Texas. "Unless we permanently repeal the death tax, we can kiss our small businesses goodbye."

"Today's vote is a victory for fairness, job creation and certainty for family businesses, farmers and ranchers," President Bush said. "I urge the Senate to act on this important matter so that we can eliminate this unfair tax once and for all."

Democrats charged that complete repeal of the tax benefits the country's wealthiest families at the expense of future generations.

Rep. Jerry Kleczka, D-Wis., said the bill's $162 billion cost to the Treasury "will be put on the national debt of the country and paid back by our kids and grandkids."

Internal Revenue Service statistics show that 52,000 estates paid taxes totaling more than $24 billion in 2000.

Daschle, a South Dakota Democrat, said lawmakers might support a bill that eases the burden on family farms and businesses by increasing the amount of an estate exempt from taxes. In 2003, the first $1 million is exempt from taxation, and that will rise to $3.5 million in 2009.

But supporters rejected any notion of compromise.

"Any compromise is an increase in taxes," said Republican Jennifer Dunn, the Washington lawmaker who drafted the bill the House passed Wednesday.

The vast majority of taxpayers do not pay the estate tax &3151; roughly one tenth of one percent of all taxpayers did. According to IRA statistics from the 2001 tax year, 27 percent of estate tax receipts came from the 469 households reporting taxable estates valued at more than $20 million.