GOP, lobbying groups mounting effort to make estate tax repeal permanent

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Posted 8:43AM on Wednesday, February 27, 2002

WASHINGTON - Backed by business and farm groups, Republicans in Congress are mounting an effort to drive a final stake through the heart of the estate tax -- which would be repealed for a single year, only to rise again under the just-enacted tax cut. The entire 10-year, $1.35 trillion tax cut signed into law in June by President Bush will evaporate at the end of 2010 unless extended by Congress because of an arcane Senate budget rule that was invoked partly to control the measure's overall cost. No piece of the tax cut would go through more contortions than the estate tax, now set to disappear at the beginning of 2010 but return in 2011 as it was a decade earlier. "The problem is that people still have to spend the same amount of time and energy and money on estate planning, as if we hadn't repealed it," said Sen. Jon Kyl, R-Ariz. "Unless you know you're going to die in 2010, you have the same obligations." Kyl and his GOP allies are trying to win approval of a measure that would make the estate tax repeal permanent, costing an estimated $104 billion over the next decade. Joining in the effort are a wide range of groups with considerable home-state political clout, such as the National Federation of Independent Business, the American Farm Bureau Federation and the National Association of Manufacturers. Bush wants Congress to make the entire tax cut permanent, but at a recent speech before a cattle rancher's group he singled out the estate tax as a priority: "Put the death tax to death," he said. In last year's tax debate, the anti-tax allies overcame evidence that the estate tax mainly affected the wealthy -- only about 2 percent of all estates pay the tax -- through a lobbying campaign stressing the impact of the "death tax" on farmers and small businesses, as well as the costs of planning to avoid it. "Our message to these senators is, 'Did you really mean what you said when you voted for this last year?"' said Dan Blankenburg, NFIB manager of legislative affairs. "Vote for this repeal and finally kill this thing." Overlaying the debate are this fall's elections, with control of the Senate at stake. The GOP drive to make the repeal permanent could put some Democrats in a tough spot, particularly those from rural states who voted in favor of the big tax cut. The NFIB, for example, is rallying small business people in key states to call, fax and e-mail their senators once a vote is imminent on a repeal measure. Kyl plans to offer a permanent repeal as an amendment to a major energy bill in the coming days. Six of the 12 Democrats who backed last year's tax bill are up for re-election in the fall. Two of them, Sens. Jean Carnahan of Missouri and Robert Torricelli of New Jersey, recently sided against making the repeal permanent in a nonbinding test vote. When she supported the $1.35 trillion tax cut, Carnahan said, "that was in a different environment." "We had a big surplus. We just have to look at this with a different eye," she said. Indeed, many Democrats say the cost of a permanent repeal could be well more than $800 billion in the next decade, too much to enable government to meet other priorities and guarantee the solvency of Medicare and Social Security. "These surpluses that are being used to pay for tax cuts and other expenses of government are going to vanish, and instead we will have massive deficits," said Senate Budget Committee Chairman Kent Conrad, D-N.D. Most retirement planners are betting that Congress will leave some form of the estate tax in place, probably with relatively high exemptions and somewhat lower rates. In 2009, the year before the temporary repeal, the first $3.5 million of an individual's estate will be exempt from tax, up from $1 million this year. "When repeal first went through, the industry felt this was short-term," said Martin Nissenbaum, national director of personal income tax planning at Ernst & Young. "Everyone assumes that the estate tax won't be repealed. In this business, you have to assume the worst." Earlier this month, 56 senators supported making the repeal permanent. Despite that majority support, it will take 60 votes to overcome Senate procedural hurdles, something both sides say will be difficult. There is little doubt the GOP-led House could pass the measure and Senate Republicans say they will block Democratic priorities unless they get a chance for a straight up-or-down vote.