Tax & Politics: "Senate Passes Estate Tax Repeal; Clinton Vows Veto"
washingtonpost.com
>>>By Eric Pianin and Glenn Kessler
Washington Post Staff Writers
Saturday , July 15, 2000 ; A01
The Senate gave final approval yesterday to a bill that would eliminate the federal estate tax, as Republicans prevailed in arguing that the 84-year-old tax has outlived its usefulness and has become a detriment to small businesses and family-owned farms.
The bill, which cleared the House June 9 in the same form, would gradually repeal the tax levied on an estate after a person dies. Already, 98 percent of estates avoid taxes altogether because the first $675,000 is exempt from taxation – an exemption due to rise to $1 million by 2006.
The new plan would cost the government $105 billion in lost revenue as it is phased in over the next decade. Thereafter, the plan would cost at least $50 billion a year.
Yesterday's 59 to 39 vote fell short of the two-thirds majority that would be needed to override a veto, which President Clinton has threatened. But ebullient GOP lawmakers and party activists said the tax bill will appeal to the growing number of Americans enriched by the stock market boom and will help make the case that a Republican Congress is racking up achievements.
"I think it will be very, very helpful to Republicans," said Sen. John McCain (R-Ariz.), the former GOP presidential candidate. "Americans feel that it's important that they be able to pass on their hard-earned gains."
Although nine Democrats joined 50 Republicans to pass the bill, Clinton renewed his pledge yesterday to veto it. Clinton and Vice President Gore denounced the measure as a sop to the richest Americans and said Congress should consider a less costly approach that would leave more of future budget surpluses for a Medicare prescription drug benefit and other needed programs.
"The Senate is wrong to pass this costly, irresponsible and regressive bill, which provides half of its benefits to about 3,000 families annually while more than 10 million Americans are waiting for an increase in the minimum wage and tens of millions of seniors lack dependable prescription drug coverage," Clinton said.
Meanwhile, Texas Gov. George W. Bush, the presumptive Republican presidential nominee, endorsed the GOP plan and called on Gore "to call on Bill Clinton to get him to sign the bill."
The Senate rejected a Democratic plan, at two-thirds the cost, that would have raised the value of estates exempt from the tax but would have kept the tax in place for the wealthiest people.
Democrats argued that, under their more modest approach, Congress could virtually wipe out the estate tax for family farmers, small business owners and all but the wealthiest people. "The bizarre thing is that we on the Democratic side were willing to entertain substantial increases in the exemptions," said Sen. Byron L. Dorgan (D-N.D.). "But they wanted to abolish the tax even for the wealthiest estates."
But Republicans were unwilling to make any concessions, arguing that fairness dictated that an outmoded tax that reaches a top marginal rate of 55 percent had to be expunged for all taxpayers. GOP supporters said the estate tax hinders investment and job creation, forces millions of people to do costly estate planning and denies many farmers and small business owners the ability to pass along their life's work to their children.
Some members offered personal testimonials about what they described as the evils of the estate tax. "The key issue here is right and wrong," Sen. Phil Gramm (R-Tex.) told reporters after the vote. "This thing is a cancer. Clinton wants to leave some of it in. We want to take it out."
Gramm acknowledged that the bill would help the rich, adding, "What's wrong with being rich in America?"
The estate tax has its roots in the turn-of-the-century Progressive Era and was enacted to help finance World War I. Until recently, efforts to substantially cut or repeal the tax have languished on the political fringes. But the movement took off this year – as confirmed by recent polls – fueled by a sophisticated GOP media campaign that dubbed the estate tax the "death tax."
The coalition backing repeal of the estate tax included nearly 100 lobbying organizations representing a Who's Who of politically powerful small business and farm groups, such as car dealers, hotel and restaurant owners, general contractors, local newspaper publishers, grocers, beverage retailers and cattlemen. The push also was backed by the big guns of the business lobby, including the National Federation of Independent Business and the National Association of Manufacturers.
Another key to growing support for estate tax repeal among Democrats was the participation by minority business groups representing women, blacks, Hispanics and Native Americans. These lobbyists argued that the estate tax placed a burden on minority-owned businesses just at the moment when business opportunities were never greater.
"I'm just two generations away from a sharecropper," said Harry Alford, president of the National Black Chamber of Commerce, the largest black trade association, which joined the repeal movement two years ago. "The death tax is a nuisance, a hindrance and a legacy killer."
The vote tallies in the House and Senate demonstrate the success of this push. In the House, for instance, Democratic lawmakers from farm regions were joined by blacks, women, Hispanics and lawmakers from districts with high property values such as Long Island – a total of 65, enough to bring Republicans within striking distance of overriding a veto.
In the Senate, Democratic leaders had to come up with a more generous alternative than the one offered by House Democrats in order to hold most of their members and to provide Democrats with political coverage.
Even then, nine Democrats defected: Patty Murray (Wash.), John Breaux (La.), Max Cleland (Ga.), Dianne Feinstein (Calif.), Robert G. Torricelli (N.J.), Ron Wyden (Ore.), Mary Landrieu (La.), Blanche Lincoln (Ark.) and Charles S. Robb (Va.), who is facing a tough reelection campaign. Four Republicans opposed the bill: Lincoln Chafee (R.I.), James M. Jeffords (Vt.), Arlen Specter (Pa.) and George V. Voinovich (Ohio).
Geoff Garin, a Democratic pollster, called yesterday's action "a minor plus" for Republicans but insisted Democrats were "more than holding their own" because of the popularity of their alternative plan.
But Jim Wilkinson, spokesman for the National Republican Congressional Committee, said the GOP's tactic of passing tax legislation piecemeal is paying off. Next week, Congress plans to send another tax bill to the president, this one cutting taxes for married couples.
"The large tax bill didn't work because swing voters yawned at it," he said. "Now we're getting their attention with snippets."
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