Estate Taxes: House of Representatives Expected to Pass Repeal Bill

Estate Taxes: House of Representatives Expected to Pass Repeal Bill

Daily Tax Report published by BNA
Page G-10
ISSN 1522-8800

Tax, Budget & Accounting

Estate Taxes: Compromise Negotiated in Senate; House Expected to Pass Repeal Bill

While business groups spearheading the estate tax reform movement remain committed to repeal, increased Democratic cooperation and a swelling deficit suggest the Senate could reach a compromise that would exempt most taxpayers without outright repeal.
The House is expected to approve a permanent estate tax repeal bill (H.R. 8) April 13, focusing attention on the odds for pushing a measure through the Senate. It was unclear late April 12 whether House Democrats would be allowed to bring up an alternative compromise measure to raise the exemption.

Sen. Rick Santorum (R-Pa.) told reporters April 12 that he hopes to see "permanent repeal or some variation of a permanent repeal" of the estate tax. A variation could include a permanent reduction in estate tax rates or a higher exemption, he said.

He hopes to find a "compromise that receives broad bipartisan support."

Otherwise, a bipartisan group of senators in negotiations has largely remained mum on the issue, having agreed to keep the discussions out of the news.

Senate Finance Committee Chairman Charles Grassley (R-Iowa) told reporters he would defer to whatever Sen. Jon Kyl (R-Ariz.), who leads the effort in the Senate, wants to do, while Kyl and senators like Ron Wyden (D-Ore.) and Trent Lott (R-Miss.) who have been privy to discussions have declined to offer details. Kyl has introduced a permanent repeal bill in the Senate (S. 420).

Wyden told reporters April 11 that he would very much like to see a bipartisan agreement that "brings down the revenue cost and deals with the legitimate problems" of the estate tax.

Schumer Seen as Odd Choice

Democratic leadership has pegged Sen. Charles Schumer (D-N.Y.) as the chief negotiator on their side, which struck at least one business lobbyist as an odd choice since he represents a liberal state and has never been on a target list for estate tax repeal.
Sens. Ben Nelson (D-Neb.) and Max Baucus (D-Mont.) have said they would support an estate tax relief measure this year, and Sen. Bill Nelson (D-Fla.) is the co-sponsor of Kyl's repeal bill. Other Democrats that may support a measure include Sens. Mary Landrieu (D-La.), Evan Bayh (D-Ind.), and Blanche Lincoln (D-Ark.), who has sponsored a proposal to exempt family farms and businesses from the estate tax. Aides expect the forecast in the Senate to become clearer over the next few weeks.

Dena Battle, director of legislative affairs at the National Federal of Independent Business, told BNA April 11 that her group remains committed to full repeal and does not support carving out exemptions. She said the deficit situation will require some heavy lifting, but said the deficit is no reason to "keep an unfair tax in place."

House Alternative

The House is expected to easily pass its bill on the floor, and the Rules Committee was considering late April 12 whether to allow an alternative amendment by Rep. Earl Pomeroy (D-N.D.).
Pomeroy said during the hearing that the alternative would increase the estate tax exemption to $3 million immediately and $3.5 million in 2009. He said his alternative would avert capital gains issues raised by H.R. 8 and come at a quarter of the $290 billion cost of that bill over 10 years.