“Time is running out” for those seeking to abolish the estate tax, warned Sen. Jon Kyl, R-Ariz., a key proponent of repeal.

Kyl made his comments at an advocacy group meeting convened by those supporting outright repeal or substantial modification of the tax.

Asked at the meeting whether abolition of the estate tax would be a death blow to the life insurance industry, Kyl said, “The life insurance industry performs a compelling function.” But, he said, “[Insurers] have literally hundreds of products, and eliminating the need for one of the products is not going to put the industry out of business.”

At the meeting, he disclosed that a vote on outright repeal, originally scheduled for this month, is likely to “slip to June” because of more pressing issues.

He confirmed that outright repeal is unlikely, although Republican leaders in the Senate will force opponents to state their views, implying that such a vote would hurt their fund-raising efforts. But, he said he hoped to win enough support to get through a “compromise” proposal on the estate tax.

The compromise would establish a $5 million threshold for the estate tax for each spouse (indexed for inflation), set the tax on estate assets above the threshold at the capital gains rate (currently 15%), and step up the basis for assets bequeathed to heirs.

However, even the compromise is seen as being too pricey for the 10 to 12 senators identified as swing votes on the issue by the leaders of the Association for Advanced Life Underwriting, which held its annual meeting here last week.

Specifically, at the AALU meeting, Roger Sutton, president, said at the opening session, “The most significant short-term threat we face is a vote on estate tax repeal, which is expected sometime this month.

“We continue to believe that repeal is a fiscally unsustainable policy,” he said. “In the interest of providing certainty in the marketplace, AALU continues to support an estate tax reform proposal with a $2.5 million exemption and a 45% top rate.

“Our lobbying efforts continue to focus on the 10 to 12 senators who will ultimately determine what level of reform can garner the necessary 60 votes for passage, and countering the politically heated rhetoric of pro-repeal forces,” Sutton said.

Currently, a tax bill passed in 2001 gradually phases out the estate tax by 2010.

However, the bill sunsets that year, restoring the estate tax to the level it was when President Bush took office in 2001.

That means the old level of a $600,000 threshold for each spouse and a 55% tax rate on those estates above that level will be restored.

The meeting at which Kyl spoke was held to energize those seeking to lobby senators sitting on the fence on the issue– Democrats and moderate Republicans.

Kyl explained that likely Democrat inroads into the Republican majority in the fall election, and, perhaps election of an opponent of outright repeal, Sen. John McCain, R-Ariz., or a Democrat, as president in 2008 “will dramatically negatively affect our ability” to win repeal.

He warned those attending the “Summit for Permanent Death Tax Repeal” that “we’re heading toward that cliff.”