January 18, 2006

Congress Daily

By Martin Vaughan

Senate Republicans are planning again to bring an estate tax repeal bill to the floor this year, but repeal advocates are divided over the best strategy for a permanent solution to the inheritance tax.

Sen. Jon Kyl, R-Ariz., said he has already reached out to select Democrats, in an effort to revive talks toward a permanent compromise on the tax that petered out last year. Kyl said he will ask Majority Leader Frist for a vote on a permanent estate tax solution early in the year, mindful that election-year politics "might affect Democrats' willingness to strike a deal in the latter half of 2006.

"It's a bit of unfinished business from last year. I would prefer to get it done before things get too heated up," Kyl said in a telephone interview.

Business lobbyists cont4nue to insist on full repeal of the tax, and say a Kyl-style compromise would be unacceptable. Last year, discussions between Kyl and Democrats aimed to lower the estate tax rate -- to anywhere from 15 percent to 45 percent -- and to exempt all but the largest estates.

In particular, business community advocates of full repeal do not want Frist to hold off scheduling a vote on full repeal until Kyl has a fall-back compromise agreement in place. Taking a vote on full repeal with an alternative compromise waiting in the wings just makes it easier for Democrats and some Republicans to vote against repeal, they argue.

"We need to make sure the people who are for full repeal know that every effort has been made to get to that repeal. They need to know that it is a straight process," said Jade West, a lobbyist for the National Association of Wholesaler-Distributors who has been active in the estate tax repeal coalition.

Some, repeal advocates -- in contrast to Kyl's preferred approach --are pushing for the estate tax vote to take place closer to November, GOP sources said.

They argue that a vote closer to the election would put more pressure on Democrats like Sens. Kent Conrad of North Dakota and Ben Nelson of Nebraska, who are up for re-election in states that are heavily Republican.

A Senate vote on a bill to repeal the tax had been slated for last September. Frist had gone so far as to file a cloture motion, setting the wheels in motion for a vote after the August recess. But Hurricane Katrina catapulted Gulf Coast recovery efforts to the top of the agenda and repeal efforts were put on hold.

Even some advocates of repeal acknowledge the setback dealt by last year's hurricane disasters might not be temporary.

"I suspect the budget, the deficit, expecting another supplemental request for Iraq this year at some point,
the probability of raising the debt limit, makes the forecast on death tax full repeal pretty cloudy," said U.S. Chamber of Commerce Vice President Bruce Josten.

In another sign that business community repeal advocates might be looking more favorably on a bipartisan compromise, the American Farm Bureau Federation last week at its annual meeting adopted a position that leaves room for exempting all estates under $10 million if full repeal is out of reach.

"A lot of people in the business community are still very desirous of having permanent repeal. But if they see that the votes aren't there, realistically they would see that certain types of compromise would be almost as good as full repeal," Kyl said.