Inheritance Tax Vote Heads to Senate
Thursday, July 13th 2000, 12:00 am
By: News On 6
WASHINGTON (AP) â€” A Republican bill to abolish federal inheritance taxes headed for a final vote Thursday in the Senate despite a veto threat from President Clinton and Democratic arguments that it would amount to a windfall for the wealthy.
Before the vote, senators plowed through a list of amendments ranging from a temporary suspension of the federal gas tax, which was defeated, to a Medicare prescription drug benefit. Some won favorable votes but still could be stripped from the bill later.
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.
``I thought government was supposed to protect our property, not confiscate it â€” not penalize someone because they've been successful,'' said Sen. Don Nickles, R-Okla.
The bill, which passed the House in June, would cut the top 55 percent 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 was fully in effect.
Republicans said government's revenue loss would be cushioned somewhat because the bill changes the way assets are valued â€” known as basis â€” 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. ``It would become your decision, based on your timetable and your economic circumstances.''
Democrats said the enormous cost of repeal and the fact that heirs of only 2 percent 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 subjected to the estate tax.
``Do we really have to protect the billionaires?'' said Senate Minority Leader Tom Daschle, D-S.D. ``We are talking about the richest 2 percent.''
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 â€” now $675,000 per individual â€” particularly for the farmers and small businesses that are hurt the most.
Daschle added that Clinton will 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 priorities to cut taxes and to argue for using the growing federal budget surplus for other spending or to reduce the public debt. In some cases, the votes were intended mainly for political consumption by senators up for re-election this year.
In early votes on amendments Thursday, the Senate:
â€”Voted 59-40 against an effort by Sen. Spencer Abraham, R-Mich., to suspend the 18.3-cent federal gasoline tax for 150 days to help ease high prices at the pump. Opponents said it would jeopardize money used for transportation projects.
â€”Voted 98-1 to make the business research and development tax credit permanent. It was extended for five years last year.
â€”Defeated, 52-46, an amendment to create a tax credit of up to $12,000 for college tuition.
If the bill were to pass with any of these amendments, it would have to return to the House. But under the bill's rules of debate, GOP leaders could strike all amendments by substituting the original House estate tax bill prior to final passage.
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.