Copyright 2000 The Washington Post
The Washington
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June 10, 2000, Saturday, Final Edition
SECTION: A SECTION; Pg. A01
LENGTH: 861 words
HEADLINE:
Repeal Of Estate Tax Wins In House; 65 Democrats Join GOP in Backing 10-Year
Phaseout
BYLINE: Glenn Kessler , Washington Post Staff
Writer
BODY:
The House voted overwhelmingly
yesterday to phase out the federal tax levied on an estate after a person dies,
with 65 Democrats crossing party lines to vote for one of the Republicans' top
legislative priorities.
The lopsided, 279 to 136 vote and the
last-minute maneuvering by Democratic leaders hoping to ward off the defections
underscored the sudden potency of the issue, giving hope to some lawmakers and
lobbyists that a deal might be possible before the legislative session ends.
President Clinton vowed to veto the GOP bill on the grounds that it is fiscally
irresponsible, but in a letter to House Speaker J. Dennis Hastert (R-Ill.), he
said he is committed to finding a compromise.
The GOP-crafted bill would
gradually repeal the estate tax over the next decade, mostly by cutting rates.
Already, 98 percent of decedents avoid taxes altogether because the first $
675,000 of an estate is exempt from taxation. Only 47,500 estates paid any
estate tax in 1998, the most recent year for which figures are available, and
about half of the money raised by the estate tax was paid by the fewer than
3,000 estates worth more than $ 5 million.
The bill's slow phase-in
would help keep its cost relatively low--$ 105 billion over 10 years. When fully
implemented, federal tax revenue would decline by an estimated $ 50 billion a
year, which has led Clinton to decry the bill as giving "the largest estates a
windfall."
But small-business and farm groups have pushed hard for an
estate tax repeal, claiming that the tax burden at death all
too often forces heirs to sell businesses and farms. That pitch helped gather
support from some of the House's most liberal members, and Democrats scrambled
to come up with an alternative that fell short of a full repeal but still would
have cut almost in half the number of estates subject to the tax.
The
Senate must act on the measure, and so far this year it has proven to be the
graveyard for a series of tax cuts approved by the House. But the House vote
gives the issue new momentum, lawmakers and lobbyists said. Some believe that a
deal could be struck on the estate tax as part of a bill boosting the minimum
wage.
"What happened in the last week is very significant," said Mark A.
Bloomfield, president of the American Council for Capital Formation, which
advocates for pro-business tax policy. "The odds have increased substantially
that something will be done on the estate tax."
Senate Minority Leader
Thomas A. Daschle (D-S.D.) said Republicans must be willing to compromise if
they want something enacted into law.
Asked how Republicans had
attracted so much Democratic support, Rep. Charles B. Rangel (D-N.Y.) said the
GOP had the better message. "Death tax just sounds wrong," he said with a shrug,
referring to the GOP moniker for the tax. "There's an old political saying: If
you've got to explain your vote, you've got a problem."
The tax, enacted
in 1916 and projected to raise $ 28 billion this year, is levied on monetary
assets and property owned by a person at death. The $ 675,000 exemption is
scheduled to rise to $ 1 million by 2006, and with some estate planning, a
couple can arrange to effectively double the exemption for heirs.
Small
businesses and farms already have a $ 1.3 million exemption and the possibility
of numerous other breaks, so relatively few farms and small businesses pay
estate tax, according to Internal Revenue Service data.
While
eliminating estate taxes, the GOP bill contains a wrinkle that lawmakers said
would ensure the very wealthy did not completely escape taxation. Currently, if
an heir sells an inherited asset, any gain or loss is figured from the value at
the time of inheritance. After certain levels of exempted assets, the GOP bill
would require heirs to figure the gain from the price for which the asset was
originally bought by the decedent.
But several tax experts said the
provision would add to the complexity of the tax code, possibly encourage new
tax shelter schemes and require burdensome record-keeping.
The
Democratic alternative, sponsored by Rangel, would have immediately cut estate
tax rates by a fifth, boosted the individual exemption to $ 1.1 million and made
it easier for farms and small businesses to claim a $ 4 million exemption. With
revenue offsets, the Democratic bill would cost $ 22 billion over 10 years, or $
5 billion a year in 2010.
Democrats argued that their bill would
essentially solve inequities in the system without gutting the tax. But
Republicans said the proposed revenue offsets, such as replacing a credit for
state estate taxes, would end up raising taxes for some estates. "They give a
little and take back a lot," said Rep. Bill Archer (R-Tex.), chairman of the
Ways and Means Committee.
The Democratic alternative was rejected 222 to
196. But in the end, only one lawmaker voting--Rep. Owen B. Pickett
(D-Va.)--disapproved of any overhaul of estate taxes. Republicans said that,
counting absent lawmakers, their bill appeared to have enough votes to override
a veto. But Democratic vote-counters said they had commitments from enough
Democrats to sustain a veto.
LOAD-DATE: June 10, 2000
