Senate derails repeal of estate tax

WASHINGTON — The Senate rejected Republican efforts Thursday to repeal the estate tax, depriving the GOP of a chance to put the issue immediately onto the Senate’s election-year agenda.

Republicans pledged not to give up. Majority Leader Bill Frist of Tennessee said, “Wiping this vicious tax from the books is a matter of principle.”

Senators voted 57-41 to limit debate and proceed toward a vote on repeal, but that was three short of the 60 needed.

“We got very close, but close doesn’t count,” said Robert Bennett, R-Utah.

Those opposed to the bill said it would deliver an unwise tax cut when the government needed more money to balance its budget and to wage war.

“This bill has nothing to do with the average American,” said Sen. Richard Durbin, D-Ill. “It is about the wealthiest people in America flexing their muscles and pushing through on Capitol Hill the most outrageous piece of special interest legislation in modern memory.”

Republicans staged the vote knowing they did not have the 60 votes to prevail on repealing the tax, a top priority of many GOP voters. Some of the tax’s biggest critics had hoped they could attract a few extra votes by extending a cooperative hand to Democrats.

Sen. Jon Kyl, R-Ariz., proposed an alternative that would have relieved more estates from taxation by letting an individual’s estate worth $5 million, or a couple’s worth $10 million, escape taxation. That exclusion would increase each year to keep pace with inflation.

Most estates exceeding that size would be taxed at capital gains tax rates. The very largest, when exceeding $30 million, would be taxed at 30 percent.

Kyl said the arrangement aimed to “tax the most wealthy but allow those small businesses and farms the opportunity to continue their existence.”

Setting the tax rate for most estates equal to capital gains would put living business and property owners on equal footing with heirs, he said.