WASHINGTON (May 26, 2000) — To the applause of tire dealers and other small-business owners, the House Ways and Means Committee has approved a bill to phase out the estate or "death" tax.
The Clinton administration, however, says repealing the tax is "fiscally unwise," and the president vows to veto the bill if it passes in its current form.
By a 24-11 vote on May 25, the committee passed the substitute amendment of committee Chairman Bill Archer, R-Texas, over the original bill sponsored by Reps. Jennifer Dunn, R-Wash., and John Tanner, D-Tenn.
The Archer bill cuts the top estate and gift tax rates from 55 to 53 percent in 2001, and to 50 percent in 2002. The 5-percent surtax on estates also would be repealed in 2001. For the next several years, tax rates would be cut by 1, 1.5 or 2 percent annually until total repeal in 2010.
Under current law, any estate valued at more than $675,000 is subject to the death tax, with the threshold rising to $1 million by 2006. Small businessmen and farmers, however, have long complained that since the value of their property often exceeds those thresholds, the heirs to family businesses often have to sell or liquidate their operations just to pay their taxes.
"The death tax doesn´t just affect the rich, it affects Americans up and down the economic spectrum," Mr. Archer said. "In fact, this tax stings hardest those men and women who lose their jobs when businesses and farms must be sold to pay the death tax."
Mr. Archer cited prominent liberals such as Hillary Rodham Clinton and Oprah Winfrey, who recently have called for estate tax repeal or reform. "When Oprah Winfrey and Bill Archer agree on something, I think we need to do something about it," he said.
But although the legislation has 240 co-sponsors including 45 Democrats, several committee Democrats questioned the claims of the bill´s supporters that it is truly bipartisan.
Rep. Charles Rangel, D-N.Y., ranking Democrat on the Ways & Means Committee, quoted White House estimates that repealing the death tax would cost the Treasury nearly $50 billion in revenues annually.
"We have to look at our nation´s overall obligations, including our responsibilities in Social Security and Medicare," Mr. Rangel said. "$50 billion in lost revenues is a lot of money."
The Tire Association of North America, which recently joined a major anti-death-tax coalition, praised the current bill, although it isn´t everything tire dealers had hoped for.
"While TANA would prefer immediate repeal of the death tax, (the bill) is a viable way to eliminate the tax," said Rebecca MacDicken, the association´s newly appointed director of government affairs, in a prepared statement.
The National Federation of Independent Business hailed the bill´s passage in committee. "Not too long ago, a total death-tax repeal seemed out of the question," said Dan Danner, NFIB senior vice president, in a press release. "Today, it´s not so far-fetched, because many members of Congress on both sides of the aisle have heard firsthand from small family businesses in their home districts about how terribly unfair this tax is."
Nevertheless, two prominent Clinton administration officials sent a letter to Mr. Rangel May 25, stating that although the estate tax system needs to be reformed, the administration opposes outright repeal.
Losing estate tax revenues "would harm our ability to advance the important priorities of maintaining fiscal discipline, paying down the national debt, extending the solvency of Medicare and Social Security and maintaining core government functions such as education and fighting crime," said the letter signed by Treasury Secretary Lawrence H. Summers and White House Chief of Staff John Podesta.