Posted on 06/12/2002 7:02:27 PM PDT by StopDemocratsDotCom
WASHINGTON (AP) - Senate Democrats dealt defeat Wednesday to President Bush ( news - web sites)'s call for permanent repeal of the estate tax, and Republicans signaled plans to turn the vote to their advantage in the fall campaign for control of Congress.
The vote was 54-44, six short of the 60 required under Senate rules to approve the measure, which Republicans said represented simple fairness and Democrats derided as a giveaway for the superrich.
"Strip it all away, this is a tax relief for billionaires when we have a very big deficit and we have other priorities," such as health care, education, Social Security ( news - web sites) and Medicare, argued Sen. Byron Dorgan ( news, bio, voting record), D-N.D.
Sen. Phil Gramm ( news, bio, voting record), R-Texas, countered that opponents of the repeal measure "believe it is worth forcing people at the death of their parents to sell off their life's work to give half of it to the government."
The president expressed disappointment. "It is wrong that, as a result of a quirk in the law, millions of Americans will be subject to the death tax beginning at the end of the decade," Bush said in a written statement. "The Congress must fix this unfair tax and provide families with certainty so they can plan for the future."
Democrats advanced two alternatives in the run-up to the final vote, both of which fell short of the 60-vote threshold required by Senate rules.
One option, which got 38 votes, would have made the tax repeal permanent for all but the largest estates — those over $3.5 million for individuals and $7 million for couples. The second, which gained 44 votes, would have added permanent relief for all family-owned farms and small businesses.
Gramm belittled the Democratic tactics, saying their proposals were not designed to help taxpayers, but were "about protecting 40 senators by giving them a fig leaf when they vote" against killing the tax.
The repeal measure was passed by the House last week on a vote of 256-171 and drew the support of 41 Democrats, an indication of the political potency of the issue in rural areas.
"It's very much an issue in the campaign for folks who vote against it," said Ginny Wolfe, spokeswoman for the GOP senatorial campaign committee. "Is this an issue which on its own will make or break a single election? Probably not. It's an additional burden on vulnerable Democrats who vote the wrong way."
"Republicans will try but they're going to have a hard time" making use of the issue, countered Tovah Ravitz-Meehan, spokeswoman at the Democratic campaign committee. "Being fiscally responsible" will be attractive to voters, she said.
The bill drew the support of 45 Republicans and nine Democrats, including three who are on the ballot this fall — Sens. Max Baucus of Montana, Max Cleland of Georgia and Mary Landrieu of Louisiana. Three other Democrats facing tough challenges — Sens. Paul Wellstone of Minnesota, Jean Carnahan of Missouri and Tim Johnson of South Dakota — voted for at least one of the Democratic alternatives.
Voting in opposition were 41 Democrats, one independent and Republican Sens. Lincoln Chafee of Rhode Island and John McCain of Arizona.
Congress approved a phase-out of the estate tax last year as part of the major tax reduction that Bush pushed to passage in his first few months in office. To conform with Senate rules, though, the legislation expires on Dec. 31, 2010, meaning that the levy would be resurrected in 2011.
As a second act, Bush has prodded Congress to pass new legislation making the cuts permanent. The GOP-controlled House hastened to comply, first passing an overall repeal measure, and then, when Senate Democrats refused to schedule a vote, breaking the bill into pieces.
Even then Democrats made no move to hold an estate tax debate willingly, but were maneuvered into it weeks ago by Gramm. For his part, Daschle picked the moment most likely to emphasize the Democratic contention that the bill would harm the economy.
He brought the issue to the floor on Tuesday, only a few hours after the Senate had pushed through legislation to increase the federal debt limit, a fact that Democrats pointed out over two days of debate.
Both sides used well-rehearsed arguments.
"Should death be a taxable event? I emphatically believe the answer should be no," said Sen. Wayne Allard ( news, bio, voting record), R-Colo. "If we want to help farmers and ranchers and if we want to help small business owners we need to kill the death tax," he added, using the term that Republicans employ to describe the estate tax.
But Dorgan said that unlike a year ago, when Bush's first tax cut measure was passed, "the country has an economy that's in some trouble and we now have deficits for years and years into the future."
Democrats produced figures showing the repeal would cost the government more than $750 billion in the decade that begins in 2011, and Sen. Jack Reed ( news, bio, voting record), D-R.I., said state treasuries would be affected, as well.
The House Wednesday, for the seventh straight year, rejected a proposed constitutional amendment requiring a two-thirds majority by both houses of Congress to raise taxes. The vote on the GOP-backed measure was 227-178, well short of the two-thirds majority needed to approve a constitutional amendment.
Rep. Pete Sessions ( news, bio, voting record), R-Texas, sponsor of the measure, argued that a super-majority was appropriate because "raising taxes should be an absolute last resort, not an easy fix for excessive government spending." But Democrats said the amendment would undermine the democratic system of majority rule and make it more difficult to close loopholes used by tax dodgers.
Your trailer may not have taxes levied on it, though
But you do say it with conviction. That's what the democrats do too. They lie with a straight face, and some people believe it.
You say the death tax is just an income tax to the heirs????
Wrong!!!!!!!
I'll give you an example. Try to understand this.
After the exemption there is an estate of 6 million subject to this death tax. The gov. wants to steal about half of that.
What if there were 10 heirs? Do you think they would each pay income tax on 600 thousand each....@ 55% rate??
What if one were in a low bracket, and one was a multi-milionaire?
Income from inheritance is not taxed by the government. The estate is taxed.
Money Matters / Joseph AnthonyAxing the estate tax: not so great?
So the House and Senate both have voted to eliminate the estate tax. That's great news for you small-business owners who want to pass your enterprise on to your children, right?
Well, not so fast, heir-head. Eliminating the estate tax may have less impact on your business than you think.
It's a 9-year phase-out The estate tax is not going to be wiped out in one fell swoop. As it stands now, the tax will be phased out in increments through 2010.
The fact that the tax won't be repealed for a decade has led many to joke about how the best estate plan is to live for another 10 years. Much of the benefit would go to a remarkably small number of people. Once the repeal is complete, about half of the total tax benefits would go to the heirs of the wealthiest one-tenth of 1% of Americans.
Capital gains may have to be paid
The bill passed by Congress holds out another big change in how assets are treated when sold by heirs.
Right now, regardless of the value of an estate, heirs get something called a "step-up in basis" when they inherit assets. That means that if you pass on to your heir a stock that you bought for $10 a share but that's worth $100 a share at your death, the heir's basis becomes the $100 it is worth when inherited. If the stock is later sold for $105 a share, taxes are paid on only the $5-per-share appreciation from the time it was inherited. Everything else is free of an income tax. This is one reason the complaints you may have heard about "double taxation" are not valid — many of the assets in estates never have been taxed, and aren't taxed when inherited, either.
That'll change under the bill passed by Congress. Once the estate tax is phased out, the step-up in basis will be limited to $1.3 million. Property inherited by a spouse could be stepped up by $3 million on top of that, meaning a spouse could inherit assets that have increased in value by as much as $4.3 million, without having to worry about additional income taxes on those gains.
How bad off are you now, anyway?
Most small-business owners don't really have to worry about estate taxes. About 98% of all estates don't have to pay any estate tax. In fact, about half of all estate taxes get paid by those leaving taxable estates of more than $5 million. That's about 3,000 people annually. Based on these numbers, I think I can safely say that only a minute percentage of the fine, intelligent, upstanding and well-rounded people who read this column have to worry about estate taxes.
If you're single, there currently is a tax on your estate only if the net value exceeds $675,000. If you're married, using some simple and inexpensive estate planning, you can increase that exemption to $1.35 million.
But there's an even-better break if you own your own business — a family-owned business-tax exclusion on top of the regular exclusion. This year, the additional exclusion is worth $625,000. Mark Luscombe, a spokesman for the tax information publisher CCH, says that with some planning, a married couple owning a business could pass on to heirs as much as $2.6 million in assets free of estate tax.
There are restrictions on qualifying for this additional break. Among other things, your family has to own at least half of the business, you have to have materially participated in the business for at least five of the eight years prior to death and the business has to be worth more than half the value of your total gross estate.
Finally, just to be sure that this break really does serve the purpose of helping keep family-owned businesses in the family, your heir must be involved in the business for at least five years out of the eight-year period following the receipt of the inheritance. There are other restrictions as well. A full explanation of how this business-tax exclusion works is complicated (and likely will be the subject of a future column).
By the way, cutting the estate tax is not necessary to preserve family farms. As David Cay Johnston of The New York Times recently reported, even the leading advocates of repealing the estate tax are hard-pressed to come up with a single example of a farm that fell out of family control because of estate taxes.
I don't think they "should." But before I react to the idea, I'd like more information. I'd like to know if that actually happens, why it happens, what can be done to prevent it, etc. What I am reading says there are exemptions and loopholes available for people to keep the family business.
I don't know if your numbers are right or not. But would you think the numbers mattered if the law affected only you? Fair is fair, no matter how many people are affected.
I have a pretty cold view of taxation. In my opinion, we get screwed when the money is allocated. That's where the unfairness occurs. Everyone goes for a piece of the action, then it's a scramble to see how gets stuck paying for it. I am not going to volunteer to pay any more than I have to, and it follows that if I favor a repeal of a tax I don't pay, that somewhere someone else is going to have to make up the difference. Now, if the GOP proposed a repeal of the estate tax, with a conservative estimate of the revenue lost--lets use the 750 billion or whatever number is out there--and within the same legislation proposed a federal cigarette tax estimated to offset that revenue loss, I would call my Senator tomorrow in support, because I don't smoke, and as a person on the sidelines, a cigarette tax is more fair than an estate tax, because one doesn't HAVE to smoke.
gree that we shouldn't be blind to party politics. But the "soak the rich" mantra is the most poisonous of all.
I am no saying soak the rich. I am saying don't soak me.
According to my reading, they don't:
Marital DeductionThe marital deduction exempts from transfer taxes all transfers between spouses, whether during life or at death, regardless of the value of the asset being transferred. For example, if husband wishes to re-title the family house into his wife’s name, the transfer of the value of the house will not be a taxable event because the transfer was to his spouse. Similarly, if husband designates wife as the beneficiary of his life insurance policy, wife will receive the death benefit without paying estate taxes on it because the proceeds came from the husband.
From jaybrinker.com
Oh, and the Republicrats are? Who has been promising to cut spending, reduce regulation, get the feds out of local education, etc. etc.
You have a short memory my friend. And my criticism of the R-rats stands. There is no way that federal spending can increase at double and triple the rate of inflation and more importantly the GDP...as it is now and has for last 4 years...and sustain tax cuts. I'm a supply sider, but the theory is not infinite...if spending outstrips growth, tax revenues will fall. Unless, of course, the tax cuts never see the light of day after Bush and company leave.
Care to explain?
We were talking about income taxes.
Are you someone who has a mistaken idea that you're clever, or are you just naturally mean?
The bottom line is that tax codes do drive behavior. There are two ways to guarantee that no money at all is collected from income taxes - one is with a 0% rate and the other is with a 100% rate. The same thing applies to other taxes.
Estate taxes like we have today penalize some people, but more of the money goes into the estate planning industry than into the gov't coffers.
The main difference between Democrats and Reublicans is the direction of the check.
I'm guessing your check is an incoming one.
You wouldn't worry so much if you were paying instead of receiving.
Yep...100% of earned income.....then you don't need any estate tax or sales tax.
That might work out...people would create an underground currency
Probably not enough people take advantage of them. I think it's mainly because they don't want to give up control over some things. They can be changed, but it's still scary to go through.
I have huge asests, but hardly any liquid. If I were to gift my children the 10k/yr., it would help pass the estate. But, I would have to gift property, or acreage. This will break up what I have and I may not be ready to do that yet. I may need it for collateral or to sell for some unknown reason. It's a tough decision to give up control.
As long as there are those of us who have to pay large amounts of taxes, there should be money to disburse to those of you who receive it.
I distinctly remember reading a post about estate taxes.
You said homes weren't taxed. I said you're mistaken.
Income taxes are not estate taxes and vice/versa. And neither is property taxes.
I don't think I have been defending the current system. I have simply been questioning the rationale for the propsed repeal, what the probable effects might be, and why the Republicans didn't sign on to the Conrad amendment.
As for the tax lawyers, I know that you are correct. I know a guy who is involved in tax law who was in DC back in the Reagan days, and he saw firsthand the resistance to tax simplification that the tax lawyers put up.
The second problem is that you are assuming that the economy is static, and gov't expenses are also fixed. And that's not true. Gov't policies that increase economic activity bring in more revenue.
The problem with that is that no one seems to be able to agree on a projection. I'd just as soon assume the worst, and if more money comes in, it's gravy. I don't recall Phil Gramm or anyone else saying a repeal of the estate tax will generate revenue. If you know of someplace where the GOP has said that, point me to it. I'd like to see what they say about that.
So, lowering taxes on business could actually mean that your individual tax rate could be lower.
Maybe. But why take chances? Which goes back to another point I have been making, which is that to me it is most rational to protect my own interests. That is not to say I want to stick it to anyone else, or take money from someone else. But the problems we have with taxation, IMO, stem from spending. And the biggest drain on the system, now and moving forward, is Social Security, and Medicare. Until those two programs are dealt with, keep your hands off of my pile. Cut my payroll taxes. Between the income tax and the SS tax, I am paying almost half my income away, and it's going--some of it--to rich folks with estates. Messed up system we got here.
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