House Votes To End Estate Taxes

The House voted Wednesday to permanently end taxes on inherited estates, rejecting a Democratic effort to retain the tax for the country's wealthiest families.

"What we're talking about here is fairness to families," said House Speaker Dennis Hastert, R-Ill. "They ought to have the comfort and relief to pass that business on to the next generation, to their children and to their grandchildren."

The bill, passed 264-163, would permanently abolish taxes on estates and reduce revenue by $162 billion through 2013. A law passed in 2001 eliminates the tax in 2010, only to resurrect it a year later, a quirk forced by Senate rules designed to prevent lawmakers from deepening budget deficits.

A nearly identical bill that passed last year died in the Senate, and this year's bill will probably meet the same fate.

"I don't think they have the votes to repeal, but we're only talking about 1.5 percent of the people who pay estate taxes today who would be affected by repeal," said Senate Minority Leader Tom Daschle, D-S.D.

Stephen Moore, president of the conservative Club for Growth, said supporters are two to four votes short of the 60 needed in the Senate to repeal the estate tax.

Moore predicted Republicans will take the issue to Senate elections and ask voters to elect lawmakers who will close that gap. "It becomes an issue that can galvanize conservative voters," he said.

The House voted 239-188 to reject a Democratic approach that would eliminate the tax for more than 99 percent of estates beginning next year by allowing individuals to exempt $3 million from estate taxes and married couples to exempt $6 million. It would have cost $28 billion over a decade.

IRS statistics for 2000 show that 52,000 estates paid more than $24 billion in estate taxes. In 2003, $1 million of an estate is exempt from taxes of up to 49 percent.

The vote comes as President Bush tours the country on a two-week push to raise millions for re-election while also promoting the tax cuts passed under his watch. Republicans pointed to a revitalized stock market as proof that their policies will pull the country into economic recovery.

Small businesses allied with each side divided over whether repealing the estate tax will support stronger economic growth.

Jerry Pierce, owner of Restaurant Equipment World in Orlando, Fla., said the tax harms workers who are laid off when small businesses shrink or close under the weight of their tax bills.

Seth Goldman, president of Honest Tea in Bethesda, Md., said eliminating the estate tax will create "an entitled class" and suppress entrepreneurship.

"There are those who claim that an estate tax is un-American, but I believe that the idea of an inherited upper-class is un-American," he said.

By Mary Dalrymple