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June 11, 2006 at 04:00 PM
Members of the Senate have rejected efforts to close off debate on an estate tax repeal bill that could have wreaked havoc on core life insurance products.
Supporters of the bill, H.R. 8, needed 60 votes to “invoke cloture,” or arrange to limit debate on the bill. The final vote on the motion that would have limited debate was 57-41.
At press time, shortly after the vote, Senate Republican leaders withdrew to determine whether they would seek an immediate vote on a compromise “reform” bill that would substantively slash the estate tax, which Democrats have called a stealth attempt at full repeal.
But insurance industry lobbyists and congressional staffers were saying that the 57-41 vote implied that, despite intensive pressure on moderate Republicans and on Democrats by supporters of full repeal or its equivalent, the votes to accomplish that this year might not be there.
“The vote could be read as a repudiation not only of repeal but of the efforts at reaching a compromise” proposed by Sen. John Kyl, R-Ariz., the chief sponsor of repeal, according to an insurance industry lobbyist who asked not to be named.
“There may be a need for repeal advocates to go back to the drawing board,” the lobbyist said.
The original compromise bill would have established a $5 million-per-spouse estate tax exemption, and the rate on estates subject to the tax would have been 15%, the capital gains rate.
Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, tried to appeal to Democrats at the last minute by adding language that would have taxed assets above $30 million at a 30% rate.
But Sen. Harry Reid, D-Nev., Senate minority leader, said during the debate leading up to the cloture vote that compromise “is full repeal anyway” and it “doesn’t even pass the laugh test.”
Under current law, the estate tax exemption would rise from $1.5 million per spouse in 2005 to full repeal in 2010. But, unless the current law is renewed, the tax will revert to 2001 levels in 2011. In 2001, the exemption was $1 million per spouse, and the rate applied to taxed estates was 55%.
The National Association of Insurance and Financial Advisors, Falls Church, Va., and an affiliated group, the Association for Advanced Life Underwriting, Falls Church, Va., support a reform package with a $2.5 million exemption and a top rate of 45%.
This plan also would sustain the current policy of a tax basis for transferred assets.
The trade groups and their members contend that proposal would exempt 99.7% of Americans from paying any estate tax and would cost less than half as much as repeal.
