House passes 10-year repeal of estate tax despite Clinton veto threat

WASHINGTON - House Republicans, joined by dozens of Democrats at odds with President Clinton, won easy passage Friday of a bill to repeal inheritance taxes by 2010. Supporters said they were acting to prevent taxes from ruining family farms and small businesses, but detractors decried it as a costly giveaway to the wealthiest Americans.

Clinton promised to veto the bill, citing revenue losses of $750 billion in the decade after repeal is fully in place and calling it a ''windfall'' for the rich. ''If this bill were presented to me in its current form, I would veto it without hesitation,'' he said in a statement Friday.

The president said he would sign a less costly Democratic alternative geared toward the handful of farms and small businesses that are hurt most by the estate tax.

But supporters of full repeal brushed aside that alternative and ignored Clinton's veto threat, winning a 279-136 vote to send the bill to the Senate.

The bill, which would cost $105 billion during the 10-year phaseout, would cut the top 55 percent federal rate in 2001 and gradually reduce all other rates over the next few years, with full repeal coming in 2010. While the bill doesn't directly affect state inheritance taxes, many that link collections to the federal tax would have to rewrite their laws if they want to keep the tax.

Only about 2 percent of families of people who die pay the estate tax, which applies this year to estates above $675,000 for an individual. In 1997, about 43,000 estates out of 2.3 million adult deaths were taxable. Because of more generous exemptions, only a tiny fraction of farm and small business heirs are affected.

But sponsors said the threat of the tax forces people to do costly estate planning, restrains expansion and investment and jeopardizes jobs.

''The death tax is a natural born killer of everything they have worked for their entire lives,'' said Rep. Bill Archer, R-Texas, chairman of the House Ways and Means Committee. ''This isn't a rich against the poor issue. This is a jobs issue and a fairness issue.''

Although repeal is a top GOP priority, co-sponsors included many black and Hispanic Democrats and liberals not normally allied with such tax cuts. They agreed the tax was causing headaches for minorities and other middle-class entrepreneurs who are taking advantage of the booming economy to build successful enterprises and create jobs.

''Who hires the workers in America? Is it the guy on the street corner or the people who achieve some success?'' said Rep. James Traficant, D-Ohio.

Sixty-five Democrats and one independent joined Republicans in voting for the measure, sponsored by Rep. Jennifer Dunn, R-Wash., and John Tanner, D-Tenn. The margin was just enough to override a veto, but Democratic leaders said a combination of absentees and members promising to switch would give them 10 more votes necessary to sustain a veto.

Democratic opponents said their alternative would better help the family farms and small businesses by raising exemptions and cutting all rates by 20 percent in 2001. At a cost of $22 billion over 10 years, they argued their measure would leave more of the projected future budget surplus for spending priority programs, paying down public debt and ensuring Social Security and Medicare don't go broke as baby boomers retire.

Democrats also pointed to Internal Revenue Service figures showing that almost half of all inheritance tax revenue comes from estates over $5 million and contended that many of these wealthy people could escape taxes entirely through shelters that protect their incomes while alive.

''We take care of the problem, but we don't take care of the multibillion dollar estate,'' said Rep. Charles Rangel of New York, senior Democrat on the Ways and Means Committee.

In a letter to House leaders, Clinton expressed support for the more modest approach and said full repeal could ''turn our backs on fiscal discipline.''

''If you send me a bill to completely repeal the estate tax, I will veto it rather than risk the fiscal progress that has contributed to the longest economic expansion in history,'' the president said.

The House rejected the Democratic alternative on a 222-196 vote, but Senate Minority Leader Tom Daschle, D-S.D., said it ultimately has the best chance of becoming law.

''If they want the accomplishment, they're going to have to compromise,'' Daschle said of the Republicans.

Like several other tax bills moving in the House this year, estate tax repeal was part of the $792 billion tax cut vetoed last year by Clinton. Republicans have carved up that bill and are pushing its individual pieces to the floor, forcing some Democrats to take uncomfortable votes as both parties vie for control of the House in the November elections.

''This Congress has been on a mission to restore basic fairness to the tax code,'' said House Speaker Dennis Hastert, R-Ill.

As the House-passed bills pile up in the Senate, Democrats are trying to remind voters that they collectively amount to another enormous GOP tax cut that would consume a big chunk of the surplus.

''It is like a big chocolate cake,'' said House Minority Leader Dick Gephardt, D-Mo. ''They keep trying to pass pieces, but when you put all the pieces together, you got a big chocolate cake.''


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