Frist Won't Attach Estate Tax Cut to Pension Bill

Senate Majority Leader Bill Frist said Tuesday he had abandoned plans to attach an estate tax cut to pension-overhaul legislation, removing one of the biggest obstacles to reaching a compromise on that bill.

Frist had earlier considered the pensions bill as the most likely vehicle for the estate tax cut, which has passed the House but been thwarted in the Senate when brought up separately.

But lawmakers negotiating the pensions legislation, including Senate Finance Committee Chairman Charles Grassley, R-Iowa, warned that inclusion of the estate tax, opposed by Democrats and at least one other Republican among the negotiators, Sen. Olympia Snowe of Maine, could doom the needed vote for an agreement.

"I just think it makes it more difficult and more questionable," Grassley said.

The tax provision was one of several that has held up a compromise on the pensions legislation, which is designed to strengthen the employer-based pension plans that some 44 million Americans rely upon for their retirements.

Negotiators met again Tuesday without finalizing the agreement.

Lawmakers also said they were also considering not including in the pension bill a separate package of tax measures that would reinstate temporarily some popular tax breaks, including a corporate research and development credit and a deduction for state and local sales taxes. Sen. Max Baucus, D-Mont., said there was talk of delaying action on those tax measures until after the recess.

Frist said at a news conference that the estate tax cut "will not be in the pension conference report." He said that "Olympia Snowe has made it clear that she would not sign the conference report if that were the case."

Senate Democratic leader Harry Reid of Nevada issued a statement last week that the Senate would reject a pensions bill with an estate tax cut. "For over four months American workers, retirees and business have been waiting patiently for the Republican Congress to deliver a pensions bill," he said. "I hope my Republican colleagues will move in a new direction by dropping the estate tax giveaway so we can quickly pass the pensions conference report."

Also still unresolved after negotiators met Monday was the extent of extra time given to financially struggling airlines to catch up with underfunded plans and a House proposal to allow more financial institutions to give advice on 401(K) plans, an idea that some in the Senate say raises conflict-of-interest problems.

The negotiators were meeting again Tuesday with the aim of reaching an agreement in time for the House and Senate to pass a bill and send it to the president before Congress leaves for its monthlong August recess.

The estate tax currently shrinks through the decade until 2010, when it disappears for one year. But that law, President Bush's first tax cut, is temporary. The estate tax reappears in 2011.

A group of senators have worked all year, heading into this fall's midterm elections with the control of Congress at stake, to reduce the estate tax in 2011 and beyond. They lacked the votes to repeal the tax, and their efforts to cut the estate tax have so far failed.