- The Washington Times - Thursday, September 1, 2005

The intense public pressure for immediate, complete, permanent repeal of the death tax is finally felt by the U.S. Senate. A Senate vote to end the filibuster and bring to a vote the House-passed bill killing this tax is set for early September.

Unfortunately, a minority of senators want to keep the death tax alive. They are plotting clever ways to take advantage of a split in the pro-repeal coalition, whose two primary objectives — immediate relief and permanent repeal — may now be in conflict.

Some past stalwarts, despairing they may not live long enough to see permanent repeal, are lobbying for immediate relief. They will accept a compromise that lowers the rate, even if it retains the tax permanently on the books. But Senate liberals insist any compromise must have a higher tax rate and a lower exemption than the Senate majority is willing to accept.

Permanent repeal backers are focused on getting the 60 votes to cut off the filibuster keeping the Senate from even considering the House-passed repeal bill. If it can be brought to the Senate floor, the leadership must be ready with a workable strategy to block an unacceptable compromise.

The cloture vote is necessary, but everyone must be aware of the real prospect of an undesirable outcome. If cloture is invoked without a known outcome negotiated beforehand and acceptable to all factions of the repeal coalition, skittish moderate Republicans and Democrats could pass a bad deal.

They could offer a series of germane amendments fixing the Alternative Minimum Tax, expanding 401(k) accounts, or adopting a version of the AmeriSave retirement proposal, all while replacing the underlying death tax bill with a substitute provision keeping the tax on the books at a punitive rate.

This scenario would defeat the immediate objective of the permanent-repeal coalition. It would also risk President Bush’s larger agenda by using policy options needed to cement tax reform and Social Security reform packages.

Senate leaders must devise a strategy guaranteeing an acceptable outcome that alleviates the cross-currents between the impulse for immediacy and the desire for permanence. The strategy must include a fallback position if cloture fails or H.R. 8 stalls out because an acceptable deal is unattainable.

One option would be to drop the death tax rate to zero immediately, starting in 2006, and keep it there as long as budget constraints allow. The full 55 percent tax rate could return earlier than scheduled to limit the budget effect if need be. The advantage to this solution of the immediacy problem is quite simple: It can be done through the fall reconciliation bill, which requires only a majority to pass the Senate.

The president continues to list permanent death tax repeal as one of his top priorities. It is perfectly reasonable for congressional Republicans to place it among the top three tax-cut priorities in the reconciliation bill, along with extension of the capital-gains and dividend-tax rate cuts.

We need to get the death tax to zero as soon as possible and for as long as possible. Fitting it into available budget constraints is a practical requirement to make it happen but the budget realities can be accommodated. The principle is sound.

Senate leaders should use all available means to repeal the death tax immediately, completely, and permanently. If immediacy and completeness are the best they can get, they should take it and continue to fight for permanence.

Lawrence A. Hunter is vice president and chief economist and Phil Kerpen is policy director of the Free Enterprise Fund.

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