House OKs bill to permanently repeal estate tax

WASHINGTON -- The Republican-controlled House voted Thursday to permanently repeal the estate tax, turning aside a Democratic effort to retain the tax but limit its impact to a few thousand of the very wealthy.

The GOP bill, passed on a bipartisan 256-171 vote, would remove the Jan. 1, 2011, expiration or "sunset" date that blocks permanent repeal under current law. The entire 10-year, $1.35 trillion tax cut enacted one year ago this week -- including repeal of the estate tax -- will disappear in 2011 because of an arcane Senate budget rule.

Senate Democrats say they have the votes to defeat the estate tax measure when it comes up later this month, even though 41 House Democrats supported it. The House also voted 231-197 to defeat a Democratic alternative that would permanently raise the estate tax exemption from $1 million today to $3 million in 2003 but keep the tax at a maximum rate of 50 percent.

Aiming to remind voters of the big tax cut in this election year, House Republicans are staging a series of debates on removing the sunset date for some of its most popular parts. President Bush is traveling to Iowa on Friday to highlight the effort on the anniversary of his signing the tax cut into law.

"The job wasn't done completely enough for the American people," said House Majority Leader Dick Armey, R-Texas.

The estate tax is particularly odd, because it would gradually be reduced from 55 percent to 45 percent -- with exemptions rising to $3.5 million -- until it disappears for 2010 only. It would then be automatically resurrected the next year at higher, pre-2001 levels.

'Pro-suicide vote'

Sen. Rick Santorum, R-Pa., said lawmakers who oppose making repeal permanent are guilty of a "pro-suicide vote" because of the decisions people might contemplate in that single tax-free year. Although the day of reckoning is years away, Republicans said the bill would bring needed certainty to what is now a chaotic and costly estate planning situation. They said the nation's economic recovery got a key boost from the tax cut, including repeal of the estate tax, and that making it permanent will solidify those gains.

Beyond that, Republicans said killing off the tax is a matter of basic fairness that resonates with voters, particularly farmers and small business operators who can face selling off their hard-won assets to pay off the government.

"Only in our government are you given a certificate at birth, a license at marriage and a bill at death," said Rep. Sam Johnson, R-Texas. "It's tax, tax, tax -- it's the Grim Reaper every day."

Of course, a future Congress could reimpose the tax -- something that has happened several times in the past.

Democrats countered that their alternative would eliminate the tax beginning next year for more than 99 percent of all estates, retaining it for only the biggest inheritances. The tax only hits a tiny fraction of all estates in any event; in 1999, IRS statistics show that just over 49,000 estates paid $119 billion in taxes.

"Let's deal with this problem now and not go the repeal route later," said Rep. Earl Pomeroy, D-N.D., the alternative's chief sponsor.

Many Democrats accused the GOP of favoring the rich, calculating that former Enron Corp. chief executive officer Jeffrey Skilling would get a tax cut of $55 million -- the equivalent of one year's Social Security taxes paid by more than 29,000 workers earning $30,000 a year.

"This is about pure greed," said Rep. Bill Pascrell Jr., D-N.J.

The GOP measure would add almost $100 billion to the 10-year cost of the tax cut, according to congressional estimates. Over the second decade, Democrats contend, the cost would balloon to $740 billion, siphoning money away from needs such as Social Security, Medicare, education and defense.

Senate Democrats, who have agreed to consider the legislation no later than June 28, say they have the votes to defeat it but plan to offer alternatives similar to that offered by Pomeroy. The Senate vote could be tricky for many Democrats who supported the tax cut last year and are up for re-election this year, including Sens. Tim Johnson of South Dakota and Jean Carnahan of Missouri.

"That's going to be a pretty hard position to defend," said Senate Minority Leader Trent Lott, R-Miss.