Bloomberg Newswire

May 24, 2000

Congressional Coalition Broadens for Repeal of Estate Taxes

      Washington, May 24 (Bloomberg) -- Estate tax opponents in the U.S. House of Representatives have broadened their coalition and their message.

      Appearing alongside Republicans nowadays at press events to slam the so-called ``death tax,'' are moderate and liberal Democrats, such as representatives Neil Abercrombie of Hawaii and Eva Clayton of North Carolina.

     Clayton, who represents a rural North Carolina district that's more than 50 percent black, said farmers and business owners can't afford tax advisers to devise strategies to defer wealth and get around the estate tax.

     ``This speaks to a broad base of people who care about fairness,'' Clayton said.

      Abercrombie called the bill ``a pro-jobs and pro-tax-fairness bill that transcends typical'' party ideologies.

     Republican Representative Jennifer Dunn of Washington, a sponsor of the bill, observed: ``The people who support this aren't the typical coalition.''

     ``We're very interested in making this a bipartisan bill,'' she added.

     The House Ways and Means Committee is scheduled tomorrow to easily approve legislation to repeal estate taxes over the next 10 years. These taxes apply to the portion of estates that exceed $675,000 and range from 18 percent to 55 percent.

     The measure, which would cost the government $19 billion over five years, is scheduled to reach the House floor and pass the week of June 5.

                             Bill's Fate

     After that, the bill's fate is less certain. Senate Majority Leader Trent Lott and Senate Finance Committee Chairman William V. Roth Jr. are strong proponents of repealing estate taxes, yet the bill might prove too costly over the long term. The liberal Center on Budget and Policy Priorities, a research group, said an estate tax repeal would benefit fewer than 2 percent of all taxpayers while costing the federal government $600 billion between 2010 to 2020.

     Iris Lav, the center's tax policy specialist, said that expense will come at a time when Baby Boomers are retiring, placing strain on spending for Social Security and Medicare.

     ``It seems that people are trying to solve a problem that doesn't exist for ordinary people at a very high cost,'' Lav said. ``It's kind of scary.''

     Repealing estate taxes by 2009 would cost $65 billion, according to the Joint Committee on Taxation. President Bill Clinton considers that price too high given competing priorities such as saving Social Security.

                     Family Farms, Businesses

     Yet a growing number in Clinton's own party back estate tax repeal because of the tax's effect on small businesses and family farms. The bill the tax committee will consider Thursday enjoys support from 44 Democrats -- including eight members of the Congressional Black Caucus.

     ``Roughly 70 percent of small businesses and family farms don't survive to a second generation,'' said Democratic Representative John Tanner of Tennessee, a co-sponsor. The tax code shouldn't prevent generational transfer of small businesses and family farms, he said.

     Dunn has carried this message to women's groups. In March, the Independent Women's Forum, National Association of Women Business Owners and the Center for the Study of Taxation issued a study on how the estate tax hurts women-owned businesses.

     It found female business owners spent an average $60,000 in the past five years on estate tax planning. Some 39 jobs were lost per business due to costs related to estate tax planning, the study found.

     Even ardent administration allies are proposing greater estate tax relief. Representative Charles Rangel of New York, the top Ways and Means Committee Democrat, has proposed $10.1 billion in estate tax relief over 10 years, targeted to small businesses.

     First Lady Hillary Rodham Clinton, campaigning for a U.S. Senate seat in New York, has proposed allowing small businesses and family farmers to exempt $1.75 million from estate taxes.

     These more moderate proposals are opposed by Dunn.

     ``I simply believe that it's an unfair tax,'' she said.

     Despite the enthusiasm for repealing estate taxes, Lav said the facts remain unchanged: the wealthy pay a lion's share of the tax.

     ``Half of the estate tax is paid by estates with more than $5 million'' in assets, Lav said. ``It's a little inexplicable why people who represent anything but the wealthiest districts would want to abolish the estate tax.''

--Rob Wells in Washington (202) 624 1933 or by e-mail rwells@bloomberg.net /wfs/jo