Estate Tax Update Jude Wanniski June 22, 2000

There is still very little in the newspapers about the fate of the estate tax, which Senate Majority Leader Trent Lott promises to bring to a vote next week. Behind the scenes there is a battle royal as the White House and Democratic leaders try to figure out a way to kill repeal and at the same time seem like the true friends of the farmer and small businessman who are clamoring for repeal now that they can smell it. Al Gore and Hillary Clinton both know their political fate is tied to what happens on the Senate vote and they can only hope the President can figure out a way to get the Senate to "compromise" on the kind of targeted plans they favor. Clinton has been spending a lot of time with House Ways&Means Chairman Bill Archer lately, hoping to coax him into accepting the kind of compromise his committee rejected when it was proposed by Rep. Charles Rangel [D NY], the ranking Democrat on Ways&Means. It would have lifted the estate-tax exemption to $4 million from its current $650,000. The White House and Gore seems to be offering a $5 million exemption, but with other conditions that make it unpalatable to the GOP leadership.

One of the reasons Republicans suspect Democrats are frantic in keeping the death tax high on Big Estates is that so much of the money that supports their special-interest foundations comes from individuals who would not establish "foundations" if there were no estate tax. There is certainly very little tax revenue involved relative to the enormous savings in time, energy and money that now goes into estate planning.

As the situation now stands, Lott is telling the Democrats he will call up the House-passed bill on Monday and file a cloture petition, so there is a straight up-and-down vote on Wednesday. If the Democrats wish to present one or two amendments to the House bill, he would then not file for cloture, but in exchange the Democrats would have to agree to accept the consequences of a Wednesday vote even if they lost their amendments. There is a lot of calculating to do because there is no certainty the 9 Democratic co-sponsors will join the Republicans in voting cloture, which requires 60 votes. And of the 55 Republican Senators, not all are enthusiastic about repeal. Karen Kerrigan, who has been staying on top of this issue in our Washington office, tells us Senator Voinovich of Ohio has definitely informed the leaders he will vote with the Democrats. Senators Jeffords of Vermont and Stevens of Alaska are said to be wobbly.

Lott appears to be comfortably in the driver's seat, though, as most Republicans know this is a winning political issue. Grover Norquist of Americans for Tax Reform tells me that whenever a candidate mentions repeal to a political audience, the audience cheers. Thus, Republican political strategists will prefer defeat on a compromise, knowing they will force a record vote on Democratic Senators who are facing re-election this fall. They will bet on George Bush winning the presidency -- partly on this issue -- and scrapping the estate tax next year with even more favorable terms than in the House bill, which phases in over ten years.

We will give you another update tomorrow if anything changes.