Tax--DowJones: "... Senate Nears Passage Of Estate Tax Repeal"
dowjones.wsj.com
>>>July 14, 2000
After Tax Break Votes, Senate Nears Passage Of Estate Tax Repeal
Associated Press
WASHINGTON -- Aiming for tens of billions of dollars in election-year tax breaks, the Senate neared passage of a Republican bill that would phase out inheritance taxes in defiance of President Clinton's veto threat.
The measure also would repeal the 102-year-old federal excise tax on telephone service, cut taxes paid by some Social Security beneficiaries and provide tax relief to farmers. It was possible, however, that these amendments to the inheritance tax measure could be removed from the bill and wind up as mainly symbolic gestures.
Republican supporters said the "death tax," which reaches a top rate of 55 percent, hinders investment and job creation, forces millions of people to do costly estate planning and particularly hurts farmers and small businesses.
"No family, no farm and no business should have to worry about this sort of thing," said Sen. William Roth, R-Del.
The bill, which passed the House in June, would cut the top 55% estate tax rate in 2001 and then gradually phase out all other rates, with full repeal coming in 2010. The cost was estimated at $105 billion during the phaseout, ballooning to $750 billion in the decade after repeal would be in effect fully.
Republicans said the government's revenue loss would be cushioned somewhat because the bill changes the way assets are valued _ known as basis _ so that an heir would owe higher capital gains taxes than under current law once the asset is sold. Capital gains tax rates, however, are much lower than estate tax rates.
"It removes death as the trigger for any tax," said Sen. Jon Kyl, R-Ariz.
Democrats said the big cost of repeal and the fact that heirs of only 2% of people who die pay estate taxes was evidence that Republicans wanted mainly to help the rich. In 1997, for example, only 43,000 estates out of 2.7 million adult deaths were subject to the estate tax.
"You can't disguise what you're doing here in terms of a large tax cut for the wealthiest people in the United States," said Sen. Byron Dorgan, D-N.D.
But the Senate voted 53-46 to defeat a Democratic substitute costing $64 billion over 10 years that would have sharply raised estate tax exemptions _ now $675,000 per individual _ particularly for the farmers and small businesses that are hurt the most.
Senate Minority Leader Tom Daschle, D-S.D., said Clinton would certainly veto the bill and that Democrats would be able to sustain it. "This isn't going anyplace," he said.
Both sides used the debate to highlight some of their other tax cut priorities. In some cases, the votes were intended mainly for political consumption by senators up for re-election this year.
In votes Thursday, the Senate:
_Approved, 97-3, an amendment by Roth to repeal on Sept. 1 the 3% excise tax on telephone service that dates from the Spanish-American War. A House-passed version would phase out repeal over three years.
_Approved, 58-41, an amendment by Sen. Rod Grams, R-Minn., that would repeal a 1993 law imposing income taxes on 85 percent, instead of 50 percent, of Social Security benefits for people with earnings over $34,000 for a single taxpayer, $44,000 for a married couple.
_Approved on a voice vote an amendment by Sen. Charles Grassley, R-Iowa, giving several tax breaks to farmers, including creation of tax-deferred accounts in which they could deposit up to 20% of their earnings. The measure also would repeal a law passed last year forcing small businesses to pay income taxes on certain sales immediately, even if the buyers were paying in installments.
_Voted 98-1 to make the business research and development tax credit permanent. It was extended for five years last year.
Abolition of the estate tax is a top priority for Republicans and several powerful lobbying groups, including the National Federation of Independent Business, the National Association of Manufacturers and the American Farm Bureau.
It is supported by Texas Gov. George W. Bush, the presumptive GOP presidential nominee, and is certain to be an issue in the fall presidential and congressional campaigns if Clinton follows through on his veto threat.<<< |
