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Senate Republicans delay vote on estate tax

Posted on: Tuesday, 27 June 2006, 17:17 CDT

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.

Source: REUTERS

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