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Money Savvy Weekend

Bid to Repeal Estate Taxes Gains Strength

House: Annual GOP drive now getting support from key Democrats. Critics say the rich would benefit most.

May 19, 2000|CURT ANDERSON | ASSOCIATED PRESS

WASHINGTON — The perennial Republican effort to repeal inheritance taxes is gaining significant Democratic support, prompting House GOP leaders to set an early June vote to gradually phase out the estate tax over the next decade.

An almost-identical repeal was included in the GOP's $792-billion tax cut that was vetoed by President Clinton last year, but supporters say the 44 Democrats who are among the current version's 238 House co-sponsors could help persuade the White House to sign it.

"There is broad support for this bill," said Rep. Jennifer Dunn (R-Wash.). "The death tax is unfair, unethical and unnecessary."

Only about 2% of Americans pay estate taxes, and under current law $675,000 in assets are exempt. That exemption is scheduled to rise to $1 million by 2006, but supporters of repeal say the tax that ranges up to 55% still would most hurt small-business people and land-rich farmers while the wealthiest people are often able to escape through tax shelters.

"The very rich are not paying it because they know how to get around it," said Rep. Eva M. Clayton (D-N.C.). "This tax disproportionately falls on the people who can't adjust their accounts ahead of time."

Clayton is among the Democratic members of the Congressional Black Caucus, many from rural districts, who have signed onto the bill.

In her New York Senate campaign, First Lady Hillary Rodham Clinton has also called for raising the exemption to $1.75 million for family farms and family-owned businesses.

"She's learning what all of us here have known for some time, that the death tax doesn't just affect the rich, it affects Americans up and down the economic spectrum," said Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee.

But other Democrats say outright repeal of the tax would mainly benefit the wealthy and take too much surplus money away from other priorities, such as providing a Medicare prescription drug benefit.

The repeal would cost an estimated $65 billion over 10 years.

The most recent Internal Revenue Service statistics show that in 1997 about 43,000 returns were filed in which $16.6 billion in net estate taxes were owed.

Of those, 329 were for estates of $20 million or more, owing $3.4 billion in taxes, while 36,000 returns for estates between $600,000 and $2.5 million generated about $5.1 billion for the government. Stocks make up about a third of the assets of estates subject to the tax, the statistics showed.

House Democratic leaders, acknowledging the political potency of the issue, are likely to propose an alternative--similar to that advocated by Hillary Clinton in her Senate campaign--that would raise the amount of exempt assets for farms and family-owned businesses. A Democratic measure introduced earlier this year would raise that exemption to $4 million for a couple.

"We can eliminate the estate tax for the overwhelming majority of American families," said Rep. Charles B. Rangel of New York, senior Democrat on the Ways and Means Committee. "However, a total repeal of the estate tax gives an enormous windfall to a tiny few of the wealthiest American families."

The Ways and Means Committee will consider the repeal bill next week, said Archer.

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