WASHINGTON – The House voted Wednesday to eliminate federal estate taxes (search) in 2010 and beyond, a repeal that Republicans hailed but many Democrats said would reward the richest families at the steep cost of deeper federal deficits.
House lawmakers voted 272-162 to prevent the tax on inherited estates from reappearing after its one-year disappearance in 2010. The bill would end the tax at a cost of roughly $290 billion over the next decade.
The House has passed bills repealing the tax several times since enacting the 2001 law that lifted the tax for a year. Those bills have languished in the Senate. Supporters hope a bigger Republican majority there could mean the difference this year.
National Federation of Independent Business (search) President Jack Faris said millions of small businesses are "looking for senators who are committed to supporting full repeal."
Sen. Jon Kyl (search), R-Ariz., refused to predict the likelihood of success.
"We are working to see what the best approach is," Kyl said.
President Bush called the elimination "a matter of basic fairness." He said, "The death tax results in the double taxation of many family assets while hurting the source of most new jobs in this country — America's small business and farms."
Other Republicans agreed and said an estate tax discriminates against some families simply to raise money for government spending.
Most estates already are exempt from federal taxes. The Internal Revenue Service said just over 2 percent of people who died in 2001 left estates subject to taxation.
Rep. Christopher Cox, R-Calif., said those pushing to retain a tax "still want to pry lots of cash out of the cold, dead fingers of America's deceased entrepreneurs."
House Democratic Leader Nancy Pelosi, D-Calif., said the bill favored the "super rich" and would make federal deficits worse.
"Do we want to continue reckless Republican tax policies or to return to a fair system of taxation?" Pelosi said.
Democrats lost in their bid to pass an alternative that quickly would increase the size of estates that are exempt from tax but leave the tax in place for the wealthiest estates. It was rejected by a 238-194 vote.
Current laws gradually increase the size of an estate exempt from tax and decrease the top tax rate before complete repeal in 2010.
This year, estates worth up to $1.5 million for an individual or $3 million for a couple owe no tax. The top tax rate stands at 47 percent. Just before its complete repeal, in 2009, the exemption increases to $3.5 million for an individual or $7 million for a couple. The tax rate falls to 45 percent.
The Democratic plan would increase the exemption to $3 million for an individual and $6 million for a couple, beginning in 2006. The exemption would increase in 2009 to $3.5 million for an individual and $7 million for a couple.
Rep. Earl Pomeroy of North Dakota, who offered the $70 billion Democratic alternative, said it would save many heirs from paying capital gains taxes that they should expect to owe if the estate tax were repealed.
"For every one it helps, it adds capital gains tax for many more," he said of the GOP's plan.