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House Passes and Sends to Senate 'Virtual Repeal' of Estate Tax
- June 23rd, 2006
Giving up on efforts to eliminate the estate tax entirely, House Republicans have passed a bill that would exempt all but the wealthiest 5,100 American families from paying the tax. The measure now goes to the Senate, where its prospects are uncertain, for a likely vote this week.
The House voted 269-156 to exempt from taxation individual estates up to $5 million and $10 million for a couple, while also softening the impact on even richer families. The tax rate, currently 46 percent, would drop to the rate assessed on capital gains, currently 15 percent. For those dying with estates valued at $25 million or more, the tax would be double the capital gains rate.
Critics called the measure "virtual repeal." The bill, which would exempt 99.7 percent of estates from paying any federal tax, would cost the U.S. Treasury $60 billion a year in the first five years after it became effective in 2011 -- 80 percent of the cost of repealing the estate tax entirely.
"This is the Paris Hilton tax relief act '” not Conrad Hilton, Paris Hilton," said Rep. Stephen Neal (D-MA). "She will be in great spirits this evening when she finds out that the Republican party has come to her aid again. This Congress has bent over backwards to help the richest in this country. Is there no end to this?"
The vote in the Senate will be close. Earlier in the month, a Republican-led effort for complete repeal came up three votes short of the 60 votes needed to prevent a Democratic filibuster. This time, House Republicans have added a sweetener: a $940 million tax break for timber companies aimed at felling key Democratic Senators in Washington State, Arkansas and Louisiana.
Jim Manley, a spokesman for Senate Minority Leader Harry Reid (D-NV), said the estate tax compromise does not go far enough for Democrats, who propose an alternative plan that would raise the exemption to $3.5 million, or $7 million for a couple.
"If there is a compromise that is both fiscally responsible and fair to the middle class, Senate Democrats would support it. But this appears to be nothing more than another tax break for multimillionaires," Manley said.
Grover Norquist, president of Americans for Tax Reform, said that if the bill becomes law, it will pave the way for eventual repeal.
"When you come back to finish it off, it's just not that big a deal," he said.
For an Associated Press article on the House measure, click here.
For an article in the New York Times, click here. (Free registration required and article is available free of charge for only one week.)
For the Center on Budget and Policy Priorities' analysis of the House bill, click here.
For prior ElderLawAnswers news articles on estate tax repeal, enter "estate tax" in the "Search for More Articles" box at the upper right.
For more information on estate taxation, click here.
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