| WASHINGTON, July 26
WASHINGTON, July 26 The partisan fight in the
U.S. Congress over the "death tax" - the Republicans' moniker
for federal taxes levied on estates passed on by individuals to
their heirs - is back.
Debate is ramping up because the estate tax is part of the
mass of tax cuts enacted under President George W. Bush in 2001
and 2003 that are now set to expire at the end of 2012.
Senate Republicans are gleefully exploiting division among
Democrats on the issue, which muddies the Democrats'
election-year message of asking the wealthy to pay their "fair
If Congress fails to act, the estate tax will rise
dramatically to 55 percent from 35 percent, after excluding the
first $1 million of value. That bothers many lawmakers,
including Democrats from ranching and farm states.
"It is one of the hardest issues for Democrats" and for
Democratic Majority Leader Harry Reid, said Jim Manley, a former
top Reid adviser. "There is a minority of Democrats, some from
rural or swing states, who have been very vocal in raising their
objections to raising" the estate tax.
Republicans spotted a political opening on this issue when
Senate Democrats omitted the estate tax from legislation to
renew the Bush tax cuts for those earning less than $250,000.
That bill passed the Senate on Wednesday, but it was not
expected to go any further. The Republican-led House will likely
vote next week to extend all of the Bush tax cuts, including
those on income above $250,000.
PARSING THE NUMBERS
Republican debate over the Senate Democrats' tax proposal on
Wednesday was dominated by talk of the estate tax.
"Tens of thousands of small and mid-sized family businesses
across the country will be broken up and handed over to the
government," under the Democrats' plan, Senator Republican
leader Mitch McConnell said in floor debate.
That is not quite true, according to data distributed by
Republicans that was compiled by the non-partisan congressional
Joint Committee on Taxation.
McConnell was referring to 55,200 estates that would face
the tax if no action is taken this year, according to JCT.
The senator's spokesman said: "It is unquestionable that the
JCT document shows this tax increase would affect tens of
thousands of individuals who earned their wealth in business of
some form of another, be it a small or mid-sized or undoubtedly
in some cases large businesses."
Under current law, the first $5 million of an estate, or
twice that if it involves a married couple, can pass to heirs
tax-free. Anything above that is taxed at 35 percent.
Most Democrats agree the tax should not snap back to the 55
percent level. Obama backs a 45 percent tax on estates after a
$3.5 million exemption. Some Democrats want a steeper exemption.
To get around their division, the Democrats decided to wait
until year end to tackle the issue. "This is an issue that we'll
have to put over to a later time, and I think rightfully so,"
Of the estates facing the tax if Congress fails to act,
2,700 are described as small business, generally non-corporate
estates with value of less than $10 million, according to JCT.
Under the proposal backed by Obama, a total of 7,200 estates
would be taxable in 2013, according to JCT, with 400 meeting the
standard for small business.
(Additional reporting by Donna Smith; Editing by Steve