US Senate Begins Debate On Estate Tax

by Mike Godfrey, Tax-News.com, Washington

12 June 2002

The Senate debate over long-term reform of the estate tax has now reached a crucial stage, with the full house beginning debate this week. The House of Representatives has already passed a bill which would make repeal of the tax permanent, along with other cuts included in last year's tax-cutting package, at an additional cost to 2012 of $373 billion, and the Senate had been considering a bill which would single out just the estate tax for permanent removal at a cost of $99 billion - but now even that limited goal seems unachievable.

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%.

Senate Majority Leader Tom Daschle of South Dakota is now confident that enough Democrats have changed their stance on the repeal bill (last year twelve of them sided with the tax-cutting bill) that he can defeat the measure. Alternatives being canvassed include an amendment which would permanently freeze the estate-tax exemption at $4 million while retaining a top rate of 50%. Another possibility is keeping the tax at its 2009 levels (a $3.5 million exemption and a top rate of 45%) which would cost less than half as much as full repeal.

Republicans are sticking to their guns. "This tax is unfair. It needs to be repealed," said Don Nickles of Oklahoma. He points out that Democrats have supported plenty of recent budget-busting bills, like the recent farm spending bill which caused howls of outrage from the right wing. "Where's the outrage on these bills?" asks Mr. Nickles.

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