The US House of Representatives will today consider a bill which would reduce estate taxes over 10 years at a cost of about $105bn.
46 Democrat representatives have lined up to back the GOP bill, including such normally reliable opponents of Republican tax cuts as Rep. William Jefferson (Dem, Louisiana).
The estate tax, often called the "death tax", is expected to raise $28bn this year, according to Internal Revenue Service estimates. Bill Archer, the Republican chairman of the Ways and Means Committee, who pushed for repeal, claimed the tax made it difficult for small business owners to bequeath their establishments to their children. He cited data gathered by the National Federation of Independent Business which indicated that only 30 per cent of family businesses survive to the second generation.
The House Ways and Means Committee last week approved the bill, making it likely that the full House will vote to abolish it today.
President Clinton has threatened to veto the bill, citing the estimated cost of $50 billion a year after repeal is completed in 2010, but there is an outside chance that enough Democrats could defect to gain the necessary two-thirds House vote to override a veto.
For Jefferson and other black and Hispanic lawmakers, the estate tax is seen as a threat to thriving minority businesses like farms which are allowing previously disadvantaged sectors of the population to establish themselves financially.
Says Jefferson, who grew up in a poor area of Louisiana, 'The reason people are so interested is that it's an anti-wealth-building tax in a time when African-Americans and Hispanics are trying to build wealth. For many of them, it's their first time ever to be able to build wealth. There is a wealth gap in this country that we have to care about.' The impact of the tax frequently forces families to sell businesses at fire-sale prices.
The existing tax law exempts the first $675,000 of an estate ($1.3m for farms and small businesses). Only 2% of estates are taxed; nonetheless, in an election year stories of family businesses threatened with closure make compelling listening, and the Republicans, who have wanted to repeal the tax ever since Ronald Reagan, are gaining more Democrat supporters than ever before.
Trying to stem the tide of defections, Rep.Charles Rangel (D, NY), senior Democrat on the tax-writing House Ways and Means Committee, and Rep. Charles Stenholm (D, Texas), top Democrat on the Agriculture Committee and a leading fiscal conservative, have brought forward an alternative bill this week which would be less costly (only $22bn over 10 years). House Minority Leader Dick Gephardt, (D-Mo.), said yesterday he hoped many of the Democrats currently supporting the GOP bill would switch to the alternative bill once they knew about it.
One national poll taken for Republicans indicated that 50 percent of registered voters said they would vote for a GOP candidate who backed repealing the estate tax, compared with 38 percent favoring a Democrat who preferred to use the money for priority spending and Social Security. The poll of 800 registered voters, taken May 15-17, had a margin of error of plus or minus 4 percentage points.
The repeal bill is H.R. 8; on the Internet at: http://thomas.loc.gov
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