Estate Tax Repeal Fails In US Senate

by Mike Godfrey, Tax-News.com, Washington

17 June 2002

As expected, the Republican attempt to secure permanent repeal of the estate tax failed in the US Senate last week when it fell on a 54 to 44 vote, six votes short of the 60 needed to overcome procedural hurdles before bringing the issue to the floor.

"This will be a campaign issue," said Senator Phil Gramm (R - Texas) who had sponsored the repeal measure that fell Wednesday, referring to mid-term Congressional elections that may change the current balance of Congress, whereby Republicans control the House, and the Democrats have a blocking majority in the Senate. 41 Democrats, one independent and two Republicans opposed letting the bill move forward, while 45 Republicans and nine Democrats supported repeal.

Two Democratic compromise proposals also failed: one that would have raised the value of assets exempt from the tax to $3 million next year and a second that would raise the exempt level to $4 million and would have exempted from the tax those heirs who qualify under a special tax provision for family-owned businesses. Republicans said the proposals were politically inspired.

Under last year's $1.35 trillion tax cuts, the estate tax is scheduled to phase out gradually over the next 10 years, until it expires in 2010. But in 2011, unless Congress makes the repeal permanent, the tax will revert to 2001 levels, with an exemption of $1 million and a top rate of 55%.

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