PROSPECT FOR DEATH TAX REPEAL IS POOR

By: Todd J. Shields and Mark Fitzgerald House Committee Clears Plan, But Clinton Threatens Veto


Leaders of family-owned newspapers want relief from the estate tax,
which can force cash-strapped heirs to sell dailies and weeklies with
proud histories as community voices.



A measure to kill the tax cleared a key congressional committee last
week. But less may be happening than meets the eye. Partisan
differences during an election year leave only poor prospects for
changing the tax.



Abolition faces strong White House opposition. Reform has the support
of prominent Democrats such as Hillary Rodham Clinton. But developments
in Congress suggest reform, too, could founder amid a polarized debate.



On one side, abolitionists, who are mainly Republican, say the
inheritance tax kills businesses. Their mostly Democratic opponents
portray the issue as a bid to grant tax relief to fat cats as part of a
wider raid on the treasury.



The standoff has been a staple for years. Business leaders, emboldened
in part by the GOP's mid-1990s electoral surge, mounted a growing
campaign against the tax, which dates to 1916, when trust-busting was
in vogue. Last year, their efforts reached a high-water mark. Congress
put language abolishing the inheritance tax into a broader bill laying
out $792 billion in tax cuts. President Clinton vetoed the measure,
calling it bloated.



Now inheritance tax opponents are back, this time with a stand-alone
bill that won't carry the baggage of wider tax cuts.



But action before the House Ways and Means Committee on May 25
indicates the measure remains hostage to a familiar dynamic, one that
sees Republicans aggressively pursuing tax cuts that Democrats deride
as irresponsible.



It took more than two hours of debate before the committee passed the
bill offered by Reps. Jennifer Dunn, R-Ore., and Henry Tanner, D-Tenn.
Three Democrats joined 21 Republicans in approving the measure. Eleven
Democrats voted 'Nay.'



The bill would reduce the inheritance tax annually until eliminating it
in 2010. It has 240 co-sponsors, enough to pass the full House in a
vote expected in early June.



Backers tout the bill's bipartisan appeal, noting that their ranks
include conservative Rep. Bill Archer, R-Texas, as well as liberal Rep.
Neil Abercrombie, D-Hawaii, and 44 other Democrats.



Even as Ways and Means was debating the measure, it received a letter
from the White House threatening a veto. The administration called the
bill 'fiscally unwise,' since a repeal of the tax would cost nearly $50
billion annually in foregone revenues - at a time when retiring baby
boomers will soon begin straining Social Security. Bill supporters
concede the $50-billion figure. But they point out that the tax brings
in only 1% of federal revenue, and say it is imposed on a lifetime
accumulation of wealth by people who paid taxes throughout their
business careers.



Democrats elicited testimony showing that the top 10% of estates pay
roughly half the tax. They suggested dropping rates and increasing
exemptions, but the idea failed in a party-line vote.



The tax ranges from 18% to 55% of an estate. The need to meet a bill
imposed by the tax played a role in recent decisions to sell The
Tribune in Ames, Iowa, and the venerable Chicago Defender.
Their fate reflects a long-term drop in the number of independent daily
newspapers.



Independents' share of daily newspaper circulation dropped from 90% in
1900 to 14% in 1998, according to Dirks, Van Essen & Murray, a
newspaper appraisal and brokerage firm in Santa Fe, N.M.

Critics say family-owned newspapers are but one of many types of
businesses jeopardized by the tax. Dunn called repeal 'a fairness
issue' and said, 'There is no moral, social, or economic justification
for this tax.'



Related story:



CLINTON VETOES ESTATE TAX (09/23/00)