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Copyright 2000 St. Louis Post-Dispatch, Inc.  
St. Louis Post-Dispatch

June 10, 2000, Saturday, FIVE STAR LIFT EDITION

SECTION: NEWS, Pg. 5

LENGTH: 738 words

HEADLINE: HOUSE MEMBERS VOTE TO PHASE OUT ESTATE TAX; CLINTON VOWS VETO

BYLINE: Bill Bell Jr.; Of The Post-Dispatch

DATELINE: WASHINGTON

BODY:


* Some small-business owners in the area say the tax is unfair. Critics contend the measure to repeal it protects the rich.
 
The federal estate tax worries Thomas Held.

His parents bought the Stone Hill Winery in Hermann, Mo., in 1965. Now, they are in their 60s. If they die tomorrow, he said, he and his siblings will have to sell up to three-fourths of the winery's vineyards.

The money would go to pay an estate tax on their capital-intensive business.

"What is a winery without its vineyards?" he asked. "Where do you come up with the money?"

On Friday, the House voted 279-136 to phase out federal estate taxes over the next decade. President Bill Clinton promised to veto the bill if it reaches his desk.

Proponents say repealing the tax would keep farmers and small-business owners from selling their assets to pay the tax. Critics charged that the measure would really help the richest of the rich. One lawmaker dubbed the bill the "Billionaire's Protection Act."

Texas Gov. George W. Bush, the presumptive Republican presidential candidate, applauded the House for passing the legislation and urged Clinton to sign it.

"This tax violates virtually every principle of common sense and free enterprise," he said from his campaign headquarters in Austin, Texas.

In 1997, only 2 percent of estates were affected by the tax, according to the Internal Revenue Service.

House Minority Leader Richard A. Gephardt, D-St. Louis County, said, "This bill is a press release designed to please wealthy donors, and nothing more."

Under current law, a person can give away up to $ 675,000 either while living or in a will without paying the tax. That level rises to $ 1 million in 2006.

Critics say the proposed tax cut would eventually cost about $ 50 billion a year. Gephardt has said that money should be spent to make preschool or prescription drugs more affordable.

Rep. Bernard Sanders, I-Vt., said some people work 40 hours a week and still "sleep in their cars because we don't put money in affordable housing. It is unjust to give a tax break to people who don't need it."

The measure may stall in the Senate, said Sen. Peter Fitzgerald, R-Ill.

Fitzgerald said he supported repealing the so-called "death tax." He said few people pay the tax, because they make plans in order to avoid it.

Rep. Kenny Hulshof, R-Columbia, has said taxpayers spent an estimated $ 23 billion on life insurance and legal and tax advice just to avoid the tax. The estate tax itself generated about the same amount of money, he said.
 
"This is a very ineffective way to produce revenue," Hulshof said.

If the estate tax is eventually eliminated, Fitzgerald said, changes should be made in capital gains taxes.

Currently, if a person sells stock before death, he or she would pay capital gains tax on any gain over the original purchase price. If the person wills this stock to his or her heirs, the stock gets a new tax cost basis - the value at the time of death. This is called a "step-up in basis."

Fitzgerald said that if the estate tax is repealed, heirs in this situation should inherit the original cost basis of the stock or similar asset. They would then pay higher capital gains taxes when the stock is sold.

The House bill has some capital gains changes that would go into effect after the estate tax is phased out. Murray Weidenbaum, a Washington University economics professor, said a capital gains tax paid should be paid at death if the estate tax is repealed.

"If you can pass it onto your heirs, no one will ever pay tax on that capital gain," said Weidenbaum.

Whatever the fate of the estate tax, its repeal will remain a top priority for small-business people. They include Bill Rauch, president of Tool Specialties, a second-generation tool and dye business in Hazelwood.

He said his father worked until he was 80 years old and had already paid taxes on the money he had earned.
 
"It's double taxation," Rauch said.
 
===========================
 
Repeal bill highlights

* 2001, top tax rate of 55 percent and 5 percent surtax on large estates is repealed.
 
* 2002, rates over 50 percent repealed.
 
* 2003-2006, 1 percentage point reduction in all rates.
 
* 2007, 1.5 percentage point reduction in all rates.
 
* 2008-2009, rates reduced by 2 percentage points each year.
 
* 2010, all remaining rates repealed.
 
--- AP  

GRAPHIC: GRAPHIC Graphic / Chart from AP - Repeal bill highlights (See text field.)


LOAD-DATE: June 11, 2000




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