House Kills Estate 'Death Tax'

The House voted Wednesday to eliminate federal estate taxes in 2010 and beyond, a repeal that Republicans hailed but Democrats said would reward the richest families at the steep cost of deeper federal deficits.

House lawmakers voted 272-162 to prevent the tax on inherited estates from reappearing after its one-year disappearance in 2010. The bill would end the tax at a cost of roughly $290 billion over the next decade.

The House has passed bills repealing the tax several times since enacting the 2001 law that lifted the tax for a year. Those bills have languished in the Senate. Supporters hope a bigger Republican majority there could mean the difference this year, but Sen. Jon Kyl, R-Ariz., refused to predict the likelihood of success.

"We are working to see what the best approach is," he said.

In a statement released after the House vote, President Bush called the elimination "a matter of basic fairness." He said, "The death tax results in the double taxation of many family assets while hurting the source of most new jobs in this country — America's small business and farms."

Other Republicans agreed and said an estate tax — imposed on any estate left to an heir — discriminates against some families simply to raise money for government spending.

Rep. Christopher Cox, R-Calif., said those pushing to retain a tax "still want to pry lots of cash out of the cold, dead fingers of America's deceased entrepreneurs."

House Democratic Leader Nancy Pelosi, D-Calif., said the bill favored the "super rich" and would make federal deficits worse.

"Do we want to continue reckless Republican tax policies or to return to a fair system of taxation?" she said.

Republicans have pressed to banish permanently the estate tax since passing President Bush's first tax cut and repealing the levy for one year — in 2010.

That tax cut set the estate tax on a decreasing path ending with repeal at the end of the decade. Until then, the size of an estate exempt from the tax gradually increases and the top rate on taxable estates gradually falls.

This year, estates worth up to $1.5 million for an individual or worth $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.

In 2004, the government collected $24.8 billion from the estate tax, according to the nonpartisan Congressional Research Service. The number of estates that owed tax in 2003 amounted to 1.25 percent of deaths the previous year.

Supporters of the tax's elimination argue that any level of tax discriminates against some at the expense of others.

"Someone will fall below it. Someone will be above it," Hulshof said of arbitrary markers exempting some estates from taxation.

Many Democrats argue that the country cannot afford the roughly $290 billion it would cost over a decade to eliminate the tax while budget deficits mount and expenditures for homeland security and war increase.

Democrats have also argued that many people would be worse off when the tax is eliminated because many who now escape estate taxation would owe capital gains taxes on their inherited estates.

A study by a senior aide to Democrats on the House Ways and Means Committee concluded that there would be more losers than winners if the estate tax is repealed. If the estate tax were repealed in 2009, the study estimated more than 71,000 estates could face new capital gains taxes. Under the estate tax laws scheduled to be in place that year, about 15,000 would owe estate tax.