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GOP puts tax-cut plans on fast track


WASHINGTON - Congressional Republicans are hurrying to finish work on their major election-year tax-cut proposals before the presidential nominating conventions this summer in hopes of showcasing the issue should President Clinton follow through on his veto threats.

The Senate is expected to vote today to approve a House-passed measure that would eliminate within 10 years the federal tax on estates worth more than $675,000. Only about 2 percent of Americans have estates large enough to be taxed. But the measure has vigorous support in the small-business community, which has promoted it as a populist issue.

Next on the Senate agenda is a vote early next week on legislation to ease the so-called marriage penalty that forces many two-earner couples to pay higher taxes than if they were single. The House has passed a similar proposal. But differences between the two versions would have to be resolved before the tax cut for married couples could go to the White House for Clinton's signature.

Clinton has offered to sign less generous versions of both the estate-tax and marriage-penalty proposals. But with the political conventions looming, Republican leaders appear to prefer a veto they could use as a high-profile campaign issue over a compromise that would give both parties credit.

They plan to hold votes to try to override any presidential vetoes. Those votes, which would require a two-thirds majority, would probably fail but would again put many Democrats on record in opposition to the popular proposals.

"We're pushing ahead with our bottom-line policies," said Sen. Larry E. Craig, an Idaho Republican. "If the president wants to veto them, that's his problem. And if the Democrats want to back that up, that's their problem."

The president made clear yesterday that he is eager to contrast the Republicans' priority of eliminating the estate tax with his own priority of providing a prescription drug benefit for Medicare beneficiaries.

"Then they would have to explain how come they want to spend $100 billion on repealing the estate tax and give 50 percent of it to the top one-tenth of 1 percent of the population, and not spend money on drugs for our seniors," Clinton said at the NAACP convention in Baltimore. "There are choices to be made here."

Even so, more than a few Democrats are expected to vote with the Republicans to repeal the estate tax, which its critics say is fundamentally unfair.

"Government should not be taking or confiscating property simply because somebody dies," said Senate Majority Whip Don Nickles of Oklahoma.

Democratic leaders, reflecting Clinton's view, argued that the Republican proposal would consume too much of the federal budget surplus: $105 billion over the next decade and $750 billion in the subsequent decade.

"Is cutting a tax that affects only the wealthiest 2 percent of Americans - at the expense of the other 98 percent - the first best use of the surplus?" Senate Democratic Leader Tom Daschle asked the Senate.

Daschle and many other Democrats agreed with Clinton that better uses of the money would include helping the elderly buy prescription drugs, helping parents send children to college and helping children care for their aging parents.

The notion of eliminating the federal estate tax, a longtime Republican goal, has become popular this year. Sixty-five House Democrats joined last month with the unanimous Republicans to provide the measure with a 279-136 majority that was only a few votes short of veto-proof.

"A lot of us were very surprised by the size of that vote," said Susan Eckely, of the National Federation of Independent Business, the small-business lobby that for years has been a leading advocate of repealing the estate tax. "The gain in support has been tremendous."

Some lawmakers argued that rising land values, retirement savings in the booming stock market and increasing numbers of African-Americans and other minorities in the entrepreneurial class have blurred the lines between the elite and the working class, and have potentially subjected more people to the estate tax. The top marginal estate tax rate is 55 percent.

But Iris Lav, an analyst for the liberal Center on Budget and Policy Priorities, said that despite this new wealth there was no indication that the proportion of Americans affected by the estate tax would increase.

"I don't see it as being that much of a problem," she said. "The perception of who this affects is at odds with reality."

The estate tax generates about $28 billion annually in tax revenue. In 1998, the most recent year for which figures are available, most of the tax was paid by fewer than 3,000 estates worth more than $5 million each.

An estate can pass tax-free to a spouse, and estates valued at up to $675,000 under existing law are not taxed at all. That tax-free level would rise, under current law, to $1 million in 2006. In addition, estates from farms and family businesses already receive a $1.3 million exemption.

In both the House and Senate, however, Democratic leaders acknowledged the growing political momentum for repeal by offering alternative proposals to eliminate the estate tax on nearly all small businesses and family farms.

The Senate proposal would have raised the exemption to $4 million per couple in 2001 and to $8 million per couple by 2010.

Senate Democrats argued that their plan would benefit all but the richest 0.5 percent of taxpayers, while leaving money left over for other purposes.

Clinton would have been willing to sign the Democratic proposal, which would cost about $64 billion over 10 years. But the senators voted 53-46, mostly along party lines, to defeat it.

As an added bonus to the estate tax bill, the Senate voted 97-3 yesterday for an amendment to repeal the 3 percent federal tax on telephone services. The House has also voted to repeal the telephone tax.

Reducing the marriage penalty would be far more expensive than repealing the estate tax because it affects many more people - about half of all married couples, according to the Congressional Budget Office.

Senate Republicans propose to ease the burden by raising the standard deduction, expanding the 15 percent and 28 percent tax brackets, boosting the Earned Income Credit on the working poor and expanding family tax credits from the Alternative Minimum Tax. Their proposal would cost $150 billion over five years.

The president has offered to support a marriage-penalty tax cut similar to the one the Republicans have proposed if they accept his plan to offer a guaranteed prescription drug benefit as part of the Medicare health insurance program for the elderly. So far, Republican leaders have shown no interest in the deal.

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