Supporters of deep cuts in the federal estate tax may have failed Aug. 3 to win enough votes in the Senate to force debate on their bill–but they are making clear they will have another go at it when Congress resumes work Sept. 5.
A motion to close off debate on the bill, H.R. 5970, failed by four votes, 56-42, to clear a procedural hurdle that would have set the stage for passage.
But, in comments to reporters Aug. 4, Senate Majority Leader William Frist, R-Tenn., made clear he will tie provisions included in the bill and sought by business leaders and Democrats in the Senate to the estate tax proposal.
He told reporters he has no plans to bring up a bill extending many popular federal tax breaks and benefits by itself.
“I don’t see it unless we do these three,” Frist said, reaffirming an earlier threat that tax extenders would not move without the permanent estate tax reduction.
A provision raising the federal minimum wage to $7.25 per hour, from $5.15, for most workers at large and midsize employers was also attached to those two measures as an added incentive for Democrats.
A Treasury Department spokesman, Tony Fratto, said the administration also intends to continue to work with Congress ahead of the midterm elections to get estate tax cuts made permanent.
“We absolutely want to see estate tax relief, at worst, extended or, at best, made permanent,” Fratto said. “It is vital to the economy to keep these tax cuts in place and, where possible, made permanent. We look forward to Congress’s return to work on this in September.”
Frist ensured that the bill, called the trifecta bill, will have another chance by changing his vote in order to reserve the right to bring it back to the floor when Congress resumes work in early September.
Dermot Healey, president of the Association for Advanced Life Underwriting, agreed the issue will resurface in the fall. After the vote, Healey said, “the estate tax issue could likely resurface again this year, and AALU will continue to advocate in favor of fair, fiscally responsible and permanent estate tax reform.”
The estate tax provision would have eliminated the estate tax for all but the wealthiest people, according to comments made by Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee and prime author of the bill when it passed the House on July 29.
The bill increases the estate and gift tax exemption amount through a phase-in to $5 million per person effective Jan. 1, 2015, and then indexes it for inflation. Tax rates for those estates with assets greater than $10 million would range from 15% to a maximum of 30% under the measure.
The insurance industry supports what it calls “sustainable reform.”
Specifically, a proposal backed by both AALU and the National Association of Insurance and Financial Advisors supports estate tax reform with a $2.5 million exemption and a top rate of 45%.
This would exempt 99.7% of families from paying any estate tax and would cost less than half as much as repeal.
In his comments after the vote, Healey said, “Once again, the necessary votes were not attained to move forward with consideration of an estate tax reform proposal that is nearly as expensive as repeal from a revenue perspective.”
Healey said the AALU “appreciates the courageous votes of senators such as Maria Cantwell and Patty Murray of Washington, Mary Landrieu of Louisiana and Lincoln Chafee of Rhode Island.”
He said he understood the attempts to “entice some of these senators to vote for this proposal by including unrelated ‘sweeteners’ to the legislation, but they stood strong and took a vote for fiscal sanity. We will be encouraging AALU members in those states to express their thanks to their legislators while they’re at home during the August recess,” he added.