Members of the U.S. House voted 272-162 Wednesday, largely along party lines, to make repeal of the federal estate tax permanent.[@@]

All of the 230 Republicans who voted on the estate tax repeal permanence bill, H.R. 8, voted for it, and 160 of the 202 Democrats who voted on the bill voted against it.

H.R. 8 now moves on to the Senate, where Sens. Jon Kyl, R-Ariz., and Bill Nelson, D-Fla., have introduced a companion bill, S. 420.

Officials of the Independent Insurance Agents and Brokers of America, Washington, strongly support H.R. 8. They called the House vote “a great step forward.”

Officials at the National Association of Insurance and Financial Advisers, Falls Church, Va., and the Association for Advanced Life Underwriting, a NAIFA affiliate, say they are not sure whether H.R. 8 has enough support to get through the Senate.

NAIFA and AALU officials say they would prefer to see Congress enact truly permanent, “sustainable” estate tax reform, such as a measure that would exempt estates valued at less than $2.5 million from federal estate taxes, than a more ambitious, “permanent” reform measure that might not last very long.

“A significant question is what level of reform is sustainable over the long term,” NAIFA and AALU officials say in a statement. “AALU and NAIFA members help [families] create complex, multiple-decade plans to make sure that assets are preserved, that they go to intended beneficiaries, and that businesses remain viable and profitable into the next generation.”

Because creating a $2.5 million estate tax exemption would be about $500 billion cheaper for the federal government than permanently eliminating the estate tax for everyone, creating a $2.5 million exemption “is far more sustainable over the long-term,” the NAIFA and AALU officials write.

When Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001, the federal estate tax applied to estates larger than $675,000, and the top federal estate tax rate was 55%. EGTRRA includes a provision that is supposed to reduce the estate tax over time and eliminate the tax completely by 2010.

This year, the federal government is exempting states valued at $1.5 million for individuals and $3 million for couples from the estate tax, and the top estate tax rate stands at 47%.

But, in 2011, an EGTRRA sunset provision could restore the old estate tax system in effect in 2001.

Rep. Earl Pomeroy, D-N.D., a former North Dakota insurance commissioner, has introduced an estate tax reform bill, H.R. 1577, that would keep the federal estate tax but increase the exemption to $3.5 million for individuals and $7 million for couples by 2009.

When the House voted for H.R. 8, it “passed up a golden opportunity to provide real estate tax relief for small business owners and family farmers today,” Pomeroy says. “My amendment would have immediately ended the estate tax for 99.7% of all Americans, providing certainty in estate planning for tens of thousands across the country.”

The American Council of Life Insurers, Washington, believes the Pomeroy bill is a better template for reform than H.R. 8, says ACLI spokesman Jack Dolan.

“We don’t think that repeal of the estate tax is the way to go,” Dolan says. “Repeal legislation eliminates the ‘step up in basis,’ which will cause accounting and bookkeeping headaches for many people who thought they would be free of taxes by congressional action on the topic. Our hope is that Congress ultimately makes a change that will provide families clear and reliable estate tax rules to follow so they can plan ahead with confidence.”

From the perspective of the life industry, “we think an increase in the estate tax exemption could address the estate tax planning concerns of more than 99% of people that could be affected by estate taxes,” Dolan says.