On June 18, the House passed legislation (H.R. 8) that would permanently abolish estate taxes. Though the measure, the Death Tax Repeal Permanency Act, passed the House by a fairly comfortable 264-163 margin, it faces tougher challenges getting through the Senate. The House vote marks the second attempt to abolish the tax. An identical measure passed the House last year, but died in the Senate, six votes short of the 60 needed for passage.
Under the 2001 tax cut (P.L. 107-16), the estate tax is scheduled to be slowly phased out, and to disappear in 2010. Without a permanent repeal, it will sunset a year later and return to the pre-2001 law with rates as high as 55 percent for estates valued at over $675,000. Under current law, estates of up to $1 million are exempt from estate taxes; estates valued at over $1 million are taxed at the highest rate 49 percent.
Rep. Earl Pomeroy (D-ND) offered an alternative proposal that would have raised the exemption beginning next year to $3 million for each individual and $6 million for married couples.
“That is very meaningful relief and it is going to go right to the heart of the farm families that [the Republicans] are talking about,” said Rep. Pomeroy. “We provide double the relief immediately. And so really, what they are offering these people is a total sham, because under their proposal, nobody gets anything until the very wealthiest a tiny number of estates in this country are taken care of.” The amendment was rejected, 188-239.
Arguing against the Pomeroy substitute, bill sponsor Rep. Jennifer Dunn (R-WA) insisted that “any compromise is an increase” in taxes. “What this amendment tells you is this: do not be successful. Do not save your money. Do not invest your money. Do not grow your business. Instead, it encourages you to spend it now, sit back, consume that estate, because the government is going to take half of that estate anyway, and everybody knows how wisely the government spends our money. Because the more successful you are and the harder and the more you work, the more expensive it will be for you to hand that business on to your children.”
Republicans argued that anything short of a full repeal would not protect families who own small businesses and farms.
“The estate tax has devastated numerous family farms and businesses. It discourages entrepreneurship, thrift, and diligence,” said Rep. Jim Ryun (R-KS). “We should not penalize an individual’s efforts to make life better for their children. I am opposed to the government taxing anyone’s property simply because the owner has died.”
Democrats countered that complete repeal benefits the nation’s wealthiest families, at the expense of future generations. Rep. Denise Majette (D-GA) pointed to her support for reduction of estate and gift taxes and urged passage of the Democratic alternative.
“I am in favor of reducing the tax burden in ways that will stimulate the economy and put money into the hands of those who need it most, but not at the expense of the long term health of this nation, and not in a way that will burden our children and grandchildren for the rest of their lives,” said Rep. Majette.
