Senators who oppose estate tax repeal today succeeded at keeping the issue off the floor.
Supporters of the bill, H.R. 8, needed 60 votes to invoke cloture, or protect the bill from a filibuster by limiting debate on the bill, but the final vote was 57-41.
The insurance industry lobbied against the bill, and some analysts have suggested that the bill could have caused problems for core life insurance products.
In comments derided in an editorial today in the Wall Street Journal, Frank Keating, president of the American Council of Life Insurers, is quoted as saying, “I am institutionally and intestinally against huge blocks of inherited wealth. I don’t think we need the Viscount of Enron or the Duke of Microsoft.”
An ACLI official confirmed the quotes.
As cited also by WSJ and noted by lawmakers in floor comments, the industry is the main source of revenue for an antirepeal advocacy group called the Coalition for America’s Priorities. One ad cited by the WSJ in its editorial, which supported full repeal, is a sound-alike of heiress Paris Hilton praises the Senate as “like awesome” for cutting her family’s taxes.
After the vote, the Senate Republican leadership withdrew to determine whether they would seek an immediate vote on a compromise reform bill that would have substantively slashed the estate tax, and which Democrats called a stealth attempt at full repeal.
Some say the vote could also cause problems for efforts by Sen. John Kyl, R-Ariz., the chief sponsor of repeal, to get a compromise bill passed.
One compromise bill would have established a $5 million threshold for the estate tax and taxed assets above that level at 15%, the capital gains rate. But on Wednesday, June 7, Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, sought to sweeten that for Democrats by proposing to tax all assets above $30 million at 30%.
Sen. Harry Reid, D-Nev., minority leader, said, however, during the debate leading up to the cloture vote that, compromise “is full repeal anyway,” adding that it “doesn’t even pass the laugh test,” and calling it a “pig in a poke.”
Under current law, the threshold gradually rises from $1.5 million in 2005 to full repeal in 2010. But unless the law is renewed, the tax would revert to 2001 levels, a $1 million threshold per spouse and a 55% tax rate above that level.
Insurance agents, through the National Association of Insurance and Financial Advisors and the Association for Advanced Life Underwriting, support a reform package with a $2.5 million exemption and a top rate of 45%.
The plan also would sustain the current policy of “stepping up” the tax basis for assets transferred to the beneficiary of an estate.
The trade groups and their members contend that would exempt 99.7% from paying any estate tax and would cost less than half as much as repeal.
“We believe this would be sustainable over the long-term,” David Stertzer, chief executive of the AALU in Falls Church, Va.
Michael Kerley, senior vice president of federal government relations for NAIFA, called the vote “pure partisan politics.”
“Unless the leaders in the Senate set about truly creating a bipartisan bill, I don’t see this going anywhere,” he added.
Kerley explained that the concern of the insurance industry is that “if that you repeal the estate tax, it will in fact siphon off a lot of tax revenue that we would want to use for other tax incentives that will help the public.”
He cited long term care insurance, health insurance, life insurance and disability income insurance.
“We believe that a much, much, much larger segment of the public would be helped by giving tax breaks to those products than would be helped by repealing the estate tax,” he said.
“If the Republicans and Democrats can work out an acceptable compromise, it can easily pass the Senate. But it has to be a true compromise.”
Stertzer of the AALU says his association expects “heavy further near-term consideration of this issue.”
There are reforms proposals receiving serious discussions in the Senate, “some of which cost nearly 90% of the cost of full repeal,” he says.
“While the timing of further Senate consideration of the estate tax issue is not yet clear, it would not be surprising to see developments as soon as next week,” Stertzer added.