Senate Republicans delay vote on estate tax

By Donna Smith

WASHINGTON (Reuters) – Senate Republicans, lacking the
support needed to pass a compromise bill that would eliminate
most taxes on inherited wealth, on Tuesday abandoned plans to
vote on it this week.

Senate Majority Leader Bill Frist said there would be no
vote on the bill to permanently reduce what Republicans call
the “death tax” before the Senate starts its July 4 recess
week.

He blamed Democrats for the delay and vowed eventually to
force a vote the bill.

“Everyone should be clear, the Senate will vote on a
permanent reduction to this tax — a tax that destroys small
businesses and family farms,” Frist said in a statement.

The Tennessee Republican had hoped for a vote this week
after the House of Representatives passed a compromise aimed at
winning over some wavering Democrats in the Senate.

Republican and Democratic aides said the bill was a few
votes short of the 60 needed to advance controversial measures
in the Senate. The House bill did not call for the full
permanent repeal sought by President George W. Bush, but would
have eliminated taxes on all but the richest estates.

At Frist’s request, House Republican leaders drafted the
compromise that would have eliminated taxes on estates up to $5
million for individuals and $10 million for couples and the
House voted 269-156 for the bill last week. It also slashed
rates for most estates still subject to the tax.

The House measure was sugar-coated with tax break for the
timber industry aimed at winning over wavering Democrats from
logging states such as Washington and Arkansas. But a Senate
Democratic aide the compromise did not win more support. A vote
on permanent repeal earlier this month fell three votes short
of the required 60, the aide said.

Republicans contend the estate tax hurts small business
owners and farmers who want to pass on enterprises to their
heirs. Opponents argue only a small percentage of estates ever
pay the tax and the proposed compromise would cost the federal
treasury more than $700 billion in the first full decade of
enactment and force deep spending cuts.

Phasing out estate taxes was a key part of Bush’s 2001 tax
cut. Currently the first $2 million of an individual’s estate
and $4 million for a married couple is exempt and the rest is
taxed at 46 percent.

Without congressional action, total repeal of the estate
tax would take effect in 2010, but only for that year. In 2011
the tax would be reimposed on estates over $1 million and the
top rate would revert to 55 percent.