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House passes estate tax repeal

WASHINGTON (AP) – The House vote Wednesday to repeal the estate tax over a decade capped a legislative blitz in which Republican leaders pushed through the major components of President Bush’s $1.6 trillion tax cut just 75 days into his term.

”It has been a good start,” said Rep. J.C. Watts of Oklahoma, the fourth-ranking House Republican. ”We hope the Senate will follow suit.”

By a 274-154 vote, the House passed a measure that would gradually reduce and then repeal the tax in 2011 at a cost of $185.5 billion. Fifty-eight Democrats joined nearly all House Republicans in favor of the legislation that was similar to a repeal then-President Clinton vetoed last year.



At the White House, Bush issued a written statement that called the vote a ”victory for fairness and a vote for economic growth.”

”Today’s vote is an important step toward restoring fairness in the tax code by eliminating the double and triple taxation that results from the death tax,” the president said. ”I look forward to continuing to work with members of Congress from both parties to enact real and meaningful tax relief for the American people.”



Things were moving in the opposite direction in the Senate, which voted tentatively to divert $450 billion from the president’s tax cut to education spending and debt reduction. And Republican Sen. James Jeffords of Vermont, a leading moderate, said he may oppose the tax cut.

Bush’s tax cuts have met little resistance in the House. In March, the House passed Bush’s across-the-board income tax cut, estimated at $958 billion, and voted for a $399 billion bill to ease the tax marriage penalty and double the child tax credit.

That brings the total of House-passed tax cuts to slightly more than $1.5 trillion, just under Bush’s often-repeated $1.6 trillion limit.

The Senate, divided evenly between 50 Democrats and 50 Republicans, has yet to take up any of the bills amid efforts to reduce the total price. But Rep. Bill Thomas, chairman of the tax-writing House Ways and Means Committee, said the House’s swift passage provides momentum, during later negotiations with the Senate, for Bush’s biggest domestic priority.

”I don’t think anybody expected, in the time frame we have, for us to move through the vast bulk of the president’s package,” said Thomas, R-Calif. ”The administration will be supportive of what we’ve done.”

Although each House bill attracted Democratic votes, most Democrats contend that as a whole, the tax relief package jeopardizes national priorities such as education and health care spending and debt reduction, does nothing to guarantee the solvency of Social Security and Medicare, and threatens a return to deficits if projected budget surpluses do not materialize.

”You can break the tax cut into parts, but you cannot break its effect,” said House Minority Leader Dick Gephardt, D-Mo. ”This is a mistake that we will pay for for years to come.”

To meet Bush’s $1.6 trillion figure, Republicans had to perform a juggling act. The estate tax repeal, for example, reduces tax rates modestly during the first eight years, with most of the cost coming with the full repeal in 2011 – later than Bush initially wanted.

”They did it by saying, ‘If you want to protect your estate, don’t die for 10 years,”’ said Rep. Charles Rangel of New York, senior Democrat on the Ways and Means Committee. ”When you’re 70 years old, those 10 years are a long way away.”

The tax affects estates of only about 2 percent of people who die each year, mainly because of a $675,000 exemption that will rise to $1 million in 2006. But avoiding the tax, which tops out at 55 percent, requires costly insurance and estate planning, and it causes particular problems for many farmers and small businesses owners often forced to sell land or assets.

An intense lobbying campaign to eliminate the tax has been waged by groups such as the U.S. Chamber of Commerce, National Federation of Independent Business and National Restaurant Association.

Democrats say the gradual phaseout hides the true cost, which they contend would actually exceed $662 billion if the repeal came immediately. They offered an $39 billion alternative that would raise the individual exemption to $2 million right away and eventually to $2.5 million, which they said would ease the tax burden for all but the wealthiest estates.

”We can do something real for 99.9 percent of the taxpayers,” said Rep. Steny Hoyer, D-Md.

But the House defeated the Democratic alternative on a 227-201 vote.

”Without full repeal, any death tax measure is a placebo,” said House Majority Whip Tom DeLay, R-Texas. ”You’ve got to kill it by ending it once and for all.”

The House-passed bill would make a change in capital gains taxes after the estate tax is repealed. This would alter the way assets are valued for capital gains purposes, in effect increasing that tax when heirs sell the assets. The first $1.3 million in gain would be exempt, $4.3 million if the heir is a surviving spouse.

Information on the bill, H.R. 8, can be found at http://thomas.loc.gov

AP-WS-04-04-01 1848EDT


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