House prepares pension, tax bill votes

By Susan Cornwell and Donna Smith

WASHINGTON (Reuters) – The U.S. House of Representatives
was preparing to vote on a bill to overhaul the U.S. pension
system and a tax cut bill that includes a long-term rollback in
estate taxes and a minimum wage increase, Republican aides said
on Friday.

Republican leaders want to finish a pension overhaul while
pushing through a contentious estate tax cut ahead of November
congressional elections, when Democrats hope to make gains.

To do so, they are peeling $35 billion in popular tax
breaks off the pension bill and combining them in one bill
along with the permanent rollback in estate taxes, aides said.
The estate tax cut has failed repeatedly to pass the Senate.

Republican leaders would also try to improve chances of
Senate passage of the estate tax by throwing in an increase in
the minimum wage to $7.25 an hour from $5.15, aides said.

The House was expected to vote on the bills on Friday or
Saturday and the Senate would take the measures up next week.

But it was unclear the strategy would work in the Senate.
Pension negotiators that had resisted having the popular tax
breaks taken out of the pension bill were angry — and worried
that the tax breaks might now be rejected with the estate tax.

“This plan throws months of work in the trash,” Montana
Democrat Sen. Max Baucus said.

Iowa Republican Charles Grassley and other Senate
negotiators will invite House negotiators to sign a deal
putting popular tax breaks back in the pension bill, an aide
said. These include deductions for tuition costs and tax
credits for companies’ research and development costs.

Senate Minority Leader Harry Reid said the Republican
leadership strategy of trying to get the estate tax through
with sweeteners would not work. Many Democrats consider it a
sop to the wealthy and a drain on government coffers.

“The Senate has rejected fiscally irresponsible estate tax
giveaways before and will reject them again,” the Nevada
Democrat said. “Blackmailing working families will not change
that outcome.

“If the Republicans were serious about raising the minimum
wage for the first time in nearly 10 years and extending tax
relief for working Americans, they would not hold them hostage
in their effort to give the wealthiest Americans hundreds of
billions more in additional tax giveaways,” he said.

However, Senate Republican leadership aides suggested they
might not bring up the pension bill, which has broad support,
in that chamber if the estate tax bill did not pass first.

“We’ll be talking to the members about that,” one aide
said.

The huge pension bill aims to close loopholes that led to
underfunding of traditional employer-sponsored pensions that
cover 44 million Americans. Most companies would have seven
years to make up funding gaps in their pension plans.

But airlines, which have frozen their plans, would be
allowed 17 years. They would have to calculate liabilities
using an 8.85 percent interest rate, a Senate aide said. This
was targeted at bankrupt Delta Air Lines Inc. and Northwest
Airlines Corp..

Airlines that have not frozen their plans would get 10
years. This provision was aimed at American Airlines, a unit of
AMR Corp., and Continental Airlines Inc..

There would also be a provision making it easier for hedge
funds to handle pension money without being subject to legal
safeguards that cover most financial institutions, aides said.

Analysts said insurers such as Prudential Financial and
MetLife Inc. would benefit because the bill allows automatic
enrollment in 401(k) retirement savings accounts and lets firms
managing these accounts offer investment advice.