To: CYBERKEN who wrote (10336 ) 8/3/2006 12:56:11 PM From: Peter Dierks Read Replies (2) | Respond to of 71588 Will Senate liberals kill another estate-tax compromise? Thursday, August 3, 2006 12:01 a.m. EDT This week the Senate will vote on a political compromise that combines an increase in the minimum wage with a cut in the federal death tax. The bill needs 60 votes to defeat a liberal filibuster, and nearly all of the 55 Republicans are in favor. So we are about to find out if Senate Democrats are more interested in achieving the policy goals they claim to want, or merely in blow-everything-up obstruction. The same bill passed the House last week by 230 to 180, with 34 Democrats in favor. But in the Senate, Minority Leader Harry Reid professes to be outraged that the GOP would wrap these two issues together, and he's leaning hard on Democrats to vote no. This is the same Harry Reid who complains that the GOP never compromises, and the same Democrats who've been demanding a vote to raise the minimum wage. We'll concede that this Senate sausage is far from ideal. The increase in the minimum wage--to $7.25 from $5.15 over three years--will cost many of the young and unskilled their jobs. Young black men who lack a high school diploma will be hit especially hard. But frightened GOP "moderates" in the House were already going to surrender on the minimum wage, so at least this package bids to get something good for the economy in return. The sausage also contains far too many special-interest tax and other breaks--notably a tax rate reduction on certain timber sales, and a provision for mine cleanup and miner health care. But most of these freebies are designed specifically to attract Democratic Senators to finally vote yes. The mining free lunch is for Robert Byrd of West Virginia, and the timber giveaway is for Washington liberal Maria Cantwell. If Democrats had kept their previous campaign pledges, none of these additional bribes would be necessary. At least a dozen Democrats have campaigned in the past for reform or repeal of the estate tax, including New York's Hillary Rodham Clinton. But somehow when it comes time to be counted, they always find an excuse to vote no. Earlier this year, all but four Democrats voted to defeat repeal, saying they preferred a more modest cut. But when a compromise was offered to a top rate of 30% from today's 46%, they opposed that too. Now that the GOP has compromised one more time, Democrats are again saying no even if it means killing their allegedly prized goal of raising the minimum wage. The latest compromise is already more than we'd prefer to see. The estate tax would survive, rather than dying for good, meaning that death would continue to be a taxable event. Income already taxed once or twice would be taxed again merely because of the inevitable accident of death. While the top death tax rate would fall to 30% by 2016, if you die in the interim you'd pay as much as 40% if your estate is worth more than $25 million because the cut is phased in. The death-tax-evasion industry--lawyers and insurance companies--will also live on. On the plus side, estates under $10 million would be exempt from tax beginning in 2016. And estates between $10 million and $25 million would pay a 15% rate. This would help a great many middle-class savers and entrepreneurs who've managed to sock away a nest egg or build a small business over their lifetimes. It would also spare many family businesses from dissolution because heirs must now literally sell the farm to pay the tax. Opponents claim that only "the rich" pay the estate tax, but many of those people are "rich" only on the occasion of their Earthly demise. These lower rates and higher exemption amounts would also be indexed for inflation under the Senate bill, so the death tax wouldn't creep back to snare the middle class as it did before. Another good provision would repeal the federal deduction for state death taxes, which would put pressure on the liberal states to repeal theirs or lose residents to Florida and other states without one. Federal law shouldn't subsidize punitive state tax policy. Among the Democrats who should see the wisdom of all this is Hawaii's Daniel Akaka, who faces a tough primary against Democrat Ed Case, who favors estate-tax reform. Soaring land prices on Oahu, as in parts of California and New York, have turned many middle-income Hawaiians into death-tax millionaires. These voters understandably feel that it is unjust and immoral to have to sell their homes or businesses to pay a death tax merely because of where they happen to live. If Mr. Akaka dances to Harry Reid's tune and votes no, he will deserve to lose his seat. All in all, the Senate proposal would help about 90% of the family-owned businesses in America that would otherwise get clobbered by the IRS upon the death of a loved one. As Senator Clinton put it when she was running in 2000, "you ought to be able to leave your land and the bulk of your fortunes to your children and not the government." We'll soon see if she and other Democrats meant it.opinionjournal.com