House Passes Estate Tax Repeal
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As we mentioned in the June column, House Republicans have been whipping up support to repeal the federal estate tax. On June 9, they gathered more than enough votes to pass a bill (H.R.8) that would phase out the tax over a 10-year period. The vote for repeal was 279 to 136, with 65 Democrats crossing party lines to join the Republicans.
Despite this strong showing in the House, President Clinton promises to veto the measure because he says its long-term cost in lost revenue could risk the nation's fiscal health. H.R. 8 would trim federal tax revenue by $28 billion over the first decade and by some $50 billion per year once the phase-out is complete.
The measure is a top legislative priority for small-business owners. They point out that the estate tax puts added pressure on heirs trying to hold on to a business when the owner dies. Many end up having to sell family businesses to pay their estate tax liabilities.
In other cases, business owners spend billions of dollars each year on estate planning costs so their heirs won't be forced to sell. That money, they claim, could be better spent on expanding their businesses, hiring new employees or providing such benefits as health insurance.
John Tanner (D-TN), a co-sponsor of the bill, is one of a number of Democrats who believe the federal estate tax should be repealed. "We think there is a societal value in family-owned businesses," he says.
Those who oppose repeal argue that the law affects only a small number of taxpayers. For example, the Joint Committee on Taxation finds that under current law, the estate tax applies to fewer than 2 percent of all estates. That means about 58,000 estates pay the tax each year.
The measure now goes to the Senate for consideration, and backers say they'll do what it takes to win passage there.