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'Death-tax' repeal looks less certain

A rich-man's crusade against Bush's plan to eliminate the estate tax might make it easier for Congress to say no.

By BILL ADAIR

© St. Petersburg Times, published March 4, 2001


WASHINGTON -- What a difference a bunch of rich guys can make.

A month ago, President Bush's plan to repeal the estate tax looked like a sure thing. It had been cleverly promoted as the elimination of the "death tax" and seemed to have the solid backing of Congress, which passed it last year only to see it vetoed by President Clinton.

But the Bush plan has lost momentum in the past two weeks since some of the nation's most prominent rich people -- including William H. Gates Sr. and Warren Buffett -- launched an effort against it. More than 600 millionaires and billionaires have since joined their campaign.

Rep. Mark Foley, R-West Palm Beach, says the full repeal is less likely now because "the average citizen sits at home and says, "If the rich don't want it, why are we doing it?' "

Foley is pushing a compromise plan that would eliminate the tax for most heirs but still apply to estates worth more than $5-million.

"I would vote for elimination (of the tax), but I also recognize the political reality," Foley said. His bill is a middle ground that should attract Democratic support, he says.

Under current law, the tax is levied on people who inherit estates worth more than $675,000. It affects only the wealthiest 2 percent of estates.

Republicans have been trying for years to repeal the tax. They say many people who inherit family farms and small businesses are forced to sell assets to pay the tax.

The Republican effort picked up steam when GOP leaders shrewdly dubbed it "the death tax," giving the impression it was a broad tax that affects everyone. It passed both houses of Congress but was vetoed by Clinton, who said it would squander the federal surplus to help the very rich.

Bush included the full repeal in his tax plan during the campaign a year ago. But the millionaires' crusade and several other factors have dimmed the prospects for a full repeal.

The group, which calls itself Responsible Wealth, was organized by Gates, the father of Microsoft founder Bill Gates, and includes investing wizard Warren Buffett and several members of the Rockefeller family. The group said in an advertisement that "repealing the estate tax would enrich the heirs of America's millionaires and billionaires while hurting families who struggle to make ends meet."

Responsible Wealth warned that if the estate tax is repealed, Congress would have to raise taxes on middle-income Americans or cut important government programs. The group said the estate tax provides an important incentive for wealthy people to give to charities.

James Galbraith, a University of Texas-Austin public affairs professor and the son of author John Kenneth Galbraith, would benefit from Bush's proposal because it would reduce his taxes when he inherits his parents' estate. But he joined Responsible Wealth because he thinks rich people have an obligation to reinvest in universities, hospitals and museums. The estate tax gives them an incentive to make donations so their money is not taxed.

He said eliminating the estate tax "would greatly undermine some of the greatest social institutions."

Republican leaders say they are still confident they can pass their plan.

"Death should not be taxable event, whether it's a big estate or a small one," said Rep. Clay Shaw, R-Fort Lauderdale. "We didn't write the bill with Bill Gates in mind."

Rep. Bill Thomas, the California Republican who chairs the Ways and Means Committee, said he is committed to eliminating the tax. "We believe we can deliver the president's product at a slightly lower price," he said.

Others are more skeptical.

Stan Collender, a specialist on the federal budget for the Washington consulting firm Fleishman-Hillard, said the involvement of Buffett and Gates dim the chances for a full repeal.

"You have two icons in the American economy who stand to benefit personally say they don't need it," Collender said. "That makes it easy (for Congress) to say no to it."

Several other factors have also come into play.

The dynamics are different than when Congress approved the bill last year. Many Democrats voted for it to score points during the political campaign, realizing it would be vetoed. Now that Bush is in office, they may stick with their party.

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