CBS Correspondent Bob Fuss reports nine Democrats joined most Republicans in the 59-39 vote to pass the bill, which would completely eliminate the estate tax by 2010 at a cost of about $105 billion in government revenue. The vote was well short of the two-thirds necessary to override a veto.
A vote was originally expected Thursday, but Senate leaders postponed the vote until the following morning.
The GOP version, which would phase out the estate tax over a 10-year period, would mean an estimated $104 billion less taxes for the government during the phase-out period and some $50 billion a year after that.
The tax is now levied on inheritances exceeding $675,000 and affects about two percent of all inheritances. Opponents of the drive to repeal the tax say it would benefit only the wealthy and harm the government's ability to deliver services to those who really need them.
But supporters of the measure say the negative impact of the death tax goes beyond affecting just the wealthy and especially causes problems for small family-owned businesses and farms.
That argument is made by the National Association of Manufacturers, one of many organizations campaigning against the tax. NAM says estate tax rates as high as 55 percent have forced the sale of many small companies at the time of the owner's death, causing the loss of jobs and income to their home communities.
Farmers have also asked for relief and help in keeping farms together after the death of the owner.
According to the Center on Budget and Policy Priorities, however, "virtually all estate taxes are paid by high-income taxpayers. Estate taxes are paid only on the estates of the wealthiest two percent of decedents; the other 98 percent of estates are exempt."
Democratic opponents of the estate tax repeal bill offered their own alternative in response to those concerns: an amendment sponsored by New York Senator Daniel Moynihan which would raise the ceiling for some types of tax-free inherited income to $4 million.
The ceiling is already set to gradually rise to $1 million, even if Congress takes no action, or if it approves the GOP version and is unable to override a subsequent presidential veto.
The Moynihan amendment was voted on Thursday afternoon and went down to defeat as senators voted mostly along party lines. The tally was 46-53.
President Clinton has said that a complete repeal of the death tax is unnecessary. Mr. Clinton also said he would have been willing to sign the Democratic version of the bill.
After addressing the death tax, senators will likely begin debate on ending the marriage penalty, a portion of the tax code that makes married couples pay more than two single filers with the same incomes.
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