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.)
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June 11, 2000