House votes to keep current estate tax rate

By Ben Pershing
Friday, December 4, 2009

The House approved a measure Thursday that would make the currentestate tax rate permanent, setting it at 45 percent for individualestates worth more than $3.5 million.

The bill passed 225 to 200, with 26 Democrats joining allRepublicans present in voting no. If Congress does not act, the estatetax will disappear in 2010, then return in 2011 under the higher rates-- 55 percent and a $1 million exemption -- that existed beforePresident George W. Bush took office.

The tax is one of several bills and expiring laws that requireattention from Congress by Dec. 31, even as the Senate expects todevote much of its time to the marathon health-care debate.

Some Democrats in both chambers would prefer to see higher estatetax rates, arguing that the pre-2001 rates were fair and provided thegovernment with much-needed revenue. Making the current rates permanentwould cost the government an estimated $234 billion in revenue over thenext 10 years.

Most Republicans oppose the estate tax on philosophical grounds andwant it abolished. "Death should not be a taxable event," said Rep. Dave Camp (Mich.), the top Republican on the tax-writing Ways and Means Committee.

While Republicans invoked distressed farmers and business ownersThursday, Democrats suggested that the GOP is more interested inshielding the wealthiest Americans from taxation.

"Abolishing the estate tax would add billions and billions to ourdeficit -- and while a small number of wealthy families would benefit,the growth of our economy as a whole would suffer," said House Majority Leader Steny H. Hoyer (D-Md.).

Under the current rate, .23 percent of all estates are subject totaxation in 2009, according to the Tax Policy Center, a think tank.Since the exemption of $3.5 million for individuals -- married couplescan generally exempt estates of up to $7 million -- is not indexed forinflation, that percentage will gradually increase over time.

It is unclear when the Senate can fit in consideration of the estatetax, and whether the House's approach could garner the 60 votesnecessary to move forward in the Senate. The Senate is more likely topass a one-year extension of current law, aides said, essentiallydeferring the question until next year.

Beyond the estate tax, a host of other measures are on deck in December, even as Senate Majority Leader Harry M. Reid(D-Nev.) has threatened to keep the chamber in session nights andweekends just to finish health care. Procedural rules in the chamberwould make it difficult and time-consuming to shift from health care toother issues, and then come back.

By the end of the year, Congress must deal in some fashion withseven unfinished appropriations bills, an increase in the federal debtlimit, expiring provisions of the USA Patriot Act and bills governinghighway funding and authorization of the Federal AviationAdministration. Expiring international trade preferences and tariffbreaks for imported products may also require attention.

Republicans are already bracing for the prospect of a huge, quickly assembled spending bill at the end of session.

"It's always ugly, but this one may reach a new level of ugliness," said Rep. Jeff Flake(R-Ariz.), a longtime critic of the appropriations process. "I assumethis is going to be one of the biggest Christmas trees we've seen atthis time of year."

But Democrats say a big reason for the last-minute pileup in theSenate is the minority's effort to slow the process on health care andother vital bills.

"So far, they've taken every opportunity they can to stall importantlegislation and slow down progress on a number of key issues," said JimManley, a spokesman for Reid.