Estate Tax Repeal Likely

Feb. 5 -- Things are looking good for a repeal of the inheritance tax ... good for the 2 percent of American families who pay the tax, that is.

President George W. Bush wants to repeal the tax, a move that would save those 2 percent of American families an estimated $236 billion over the next 10 years.

The estate tax repeal is part of Bush's huge, $1.6-trillion tax cut package. Congress passed a bill to repeal the tax last year, but President Clinton vetoed it. The sponsors of that bill reintroduced it last week.

Even if Bush's larger package gets derailed, congressional observers say, the stand-alone estate tax measure will almost certainly go through.

Who’s It For?

The inheritance tax currently kicks in at $675,000, on a sliding scale starting at 37 percent and rising to 55 percent. The same tax applies to gifts (so that taxpayers cannot avoid the inheritance tax by giving their money away before they die).

Abolishing the tax would allow even the wealthiest families to inherit tax-free.

Supporters of the repeal say it will help the owners of family farms and businesses. Family farmers say estate taxes make it very hard to pass on their farms and ranches from generation to generation.

"It's not fair to take away family farms from folks who have never considered themselves wealthy but have taken care of their fields for generations," says Rep. Jennifer Dunn, R-Wash., who is co-sponsoring the stand-alone bill with Democrat John Tanner of Tennessee.

Tanner says the tax unfairly punishes successful entrepreneurs. "This is not a rich versus poor issue," he says.

Who Gets Nothing?

Opponents disagree, saying the repeal is really a giveaway to the rich. They argue that family farms and businesses account for a tiny proportion of those who will benefit, and that current law contains special tax breaks for them anyway.

According to analysis by a Washington think tank, half of the total estate tax in 1997 was paid by families inheriting estates of $5 million or more. That's just 2,400 families, the heirs of the wealthiest one in 1,000 Americans who died that year, the Center on Budget and Policy Priorities found.