House upholds estate tax veto

13 Democrats switch votes, defeat GOP on `death tax' repeal

September 08, 2000|By Karen Hosler | Karen Hosler,SUN NATIONAL STAFF

WASHINGTON - House Democrats closed ranks yesterday to sustain President Clinton's veto of legislation that would have eliminated the federal estate tax, contending that the Republican bill would help the very richest Americans at the expense of the middle class.

Under pressure from the White House and their own leaders, 13 Democrats who had supported the bill in June when it passed the House switched sides yesterday to deny Republicans the two-thirds majority they needed to override the veto.

Seven Democrats who were absent for the earlier vote also contributed to the 274-157 tally - 14 votes short of the two-thirds margin.

Democrats said the measure would benefit only the 2 percent of estates large enough to owe federal taxes.

"I made my point that I wanted the Democrats to get serious about middle-class tax relief," said Rep. Albert R. Wynn of Prince George's County, who was among the Democratic vote-switchers. "I think we need to do something to help small businesses and family farms.

"But we don't have to go as far as the Republicans did to help people like Bill Gates."

The three other Maryland Democrats also voted to sustain the veto; all four Maryland Republicans voted to override.

Clinton applauded the tally, calling the bill "a huge tax cut for the most well-off Americans" whose high cost would imperil the nation's economic prosperity and crucial government programs.

Republican supporters of the bill had argued that the estate tax - which they term the "death tax" - forces millions of middle-class business owners and farmers to pay huge sums for insurance to protect heirs from estate taxes.

In other cases, they contended, the heirs have to sell the farms or businesses to pay the taxes.

Proponents of the repeal also argued that the very richest Americans are able to avoid the tax by setting up trusts and foundations, so the real burden falls on ordinary Americans.

"The death tax has given purgatory a new meaning," said Rep. Bill Archer of Texas, chairman of the House Ways and Means Committee. "Death as an event should not trigger a tax."

Republicans said they were unwilling to compromise by moving toward a Democratic alternative that would eliminate the tax on estates worth up to $4 million but would continue to tax the wealthiest 1 percent of estates.

They prefer instead to make total repeal of the estate tax an issue in the fall elections.

"It helps us build the case for the campaign," House Majority Whip Tom DeLay of Texas said of yesterday's vote. "The American people are going to see that the Democrats want to keep the money in Washington; they don't want to give it back."

Democrats argued that it was a question of whether repealing the estate tax, at a cost of $105 billion over the first 10 years, was the best use of a budget surplus that might not be as large as projected.

"We still have a $5.6 trillion national debt," said Rep. Charles W. Stenholm, a Texas Democrat who suggested that the money would be better put toward paring down the debt and shoring up the Social Security and Medicare programs.

"I don't want to leave behind a massive national debt because we want to do the politically popular thing in the year 2000," he said.

Propelled by heavy lobbying on behalf of the small-business community, the notion of repealing the estate tax picked up powerful election year momentum in Congress this spring - even though 98 percent of estates owe no federal tax.

Under current law, an estate can pass tax-free to a spouse, and estates valued at up to $675,000 are exempt from federal taxation. The tax free level is scheduled to rise to $1 million in 2006. Farms and family businesses now receive a $1.3 million exemption.

Most of the tax burden is carried by fewer than 3,000 estates, worth more than $5 million each, that pay marginal rates ranging up to 55 percent. The vetoed bill would have taken 10 years to completely eliminate the estate tax. Relief would have gone first to those paying at the highest rate.

Rep. Sam Farr of California, another of the 13 Democrats who voted for the bill in June but switched to back Clinton's veto this time, chastised the Republicans for refusing to compromise.

"I voted for your bill because I thought you would lead us into a meaningful discussion of estate tax reform, but you were more interested in a political message," Farr said. "Shame on you."

For the National Association of Independent Businesses, the powerful small-business lobby that has made repeal of the estate tax its top priority, this is no time for compromise.

Flushed by its success in at least pushing the measure close to enactment, the organization is mobilizing its 600,000 members for the November elections to try to ensure total victory next year.

"Four years ago, nobody was even talking about this issue," said Jim Hirni, a lobbyist for the association. Now, he said, surveys suggest that most Americans support the idea of total repeal.

Instead of trying to negotiate a compromise with Clinton, Hirni said, his members will be encouraged to work against the re-election of Democrats who opposed the bill yesterday, as well as against Vice President Al Gore, the Democratic presidential nominee.

"We just need to carry the momentum we've got into the election and keep it going next year," Hirni said.

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