House Fails to Override Veto of Estate Tax Repeal

The House narrowly failed Thursday to override President Clinton’s veto of a bill to eliminate the estate tax, catapulting the issue from Capitol Hill to the campaign trail where voters can decide whether to elect friends or foes of the measure.

The House voted 274 to 157 to pass the bill over Clinton’s objection--a solid majority but 14 votes short of the two-thirds margin needed to override a veto.

Clinton averted an embarrassing defeat in part because he and other Democratic leaders persuaded 13 House Democrats to drop their past support for repealing the estate tax and join in sustaining the veto. Among the vote-switchers were five California Democrats who have sought relief from estate taxes because many of their constituents, living in areas where real estate values have skyrocketed, own homes that would be subject to the levy.

Clinton hailed the House vote, saying that the vetoed measure was “a misguided bill that provides a huge tax cut for the most well-off Americans at the expense of working families.”

Republican supporters continued to press their case that the tax is inherently unfair. “You don’t give the dead guy a tax break,” said Majority Leader Dick Armey (R-Texas). “What you do is abstain from stealing his life’s work . . . from his children.”

Although the House vote signals the end of this year’s debate about the issue as a legislative matter, Republicans promised to keep it alive as the Nov. 7 election approaches. GOP candidates--including presidential nominee George W. Bush--can be expected to tout their support for ending the estate tax as an emblem of their commitment to returning much of the emerging federal budget surplus to voters in the form of tax cuts.

Still, Thursday’s vote was not simply a political exercise. With 53 Democrats from across the country willing to defy their president and stand firm in supporting the bill, the assault against the estate tax clearly gained momentum.

“If [a future] Congress doesn’t repeal the estate tax, it will at least dramatically reform it to make it invisible and not applicable to many people,” said C. Clinton Stretch, a tax policy expert at the accounting firm of Deloitte & Touche.

Among the lobbyists that have exerted strong pressure on members of both parties to address the estate-tax issue are those representing farmers and small businesses. They argued that the tax is particularly burdensome to heirs of family farms and small businesses, who sometimes have to sell their assets to pay the levy.

And many lawmakers recognize that the high-technology economy has created a new generation of entrepreneurs who already are worried that the tax will be levied on their estates in the future.

Under current law, the inheritance tax applies to estates worth more than $675,000 (that figure is scheduled to rise to $1 million by 2006). The tax rate ranges from 37% to 55%, depending on the size of the estate.

The bill vetoed by Clinton would have eliminated the estate tax gradually, repealing it completely by 2010.

According to the Internal Revenue Service, the tax applies to only about 2% of estates annually. In 1997, the most recent year for which such data are available, about 43,000 estates out of 2.3 million were taxable.

The bill would have cost the Treasury an estimated $105 billion in the first 10 years, as the tax was scaled down, then $750 billion over the next 10 years, according to administration estimates.

Bush has supported the repeal effort as part of his plan to cut taxes by $1.3 trillion over 10 years, and his campaign quickly sought to make political capital of the House vote. “When [Bush is] president there won’t be a veto override because he will sign into law legislation to abolish” the estate tax, Bush spokesman Ari Fleischer said.

Many Republican candidates for the House and Senate also are campaigning on their support for estate tax repeal--as well as efforts to roll back taxes on married couples. A bill to reduce the so-called “marriage penalty” was vetoed by Clinton as too far-reaching and the House is scheduled to vote on an override next week.

Although that attempt also is expected to fail, Republicans hope that the congressional skirmishing will send a clear message: Vote for Bush and a Republican Congress and big tax cuts will follow.

“Farmers, ranchers, families and small-business owners will remember this issue on Nov. 7 when they step into the voting booth,” said Rep. J.C. Watts Jr. (R-Okla.). “I guarantee the 13 flip-flopping Democrats won’t be bragging about this vote.”

However, the political impact may be limited because most of the House Democrats who face the toughest reelection fights--such as California’s Calvin M. Dooley of Visalia and Ellen O. Tauscher of Pleasanton--voted with Republicans to override Clinton’s veto. And other Democrats have supported an alternative that would provide an immediate, substantial cut in the tax but not abolish it.

Democratic presidential candidate Al Gore has embraced that approach. In accepting the nomination at the Democratic convention last month, he said he would seek to “reform the estate tax so people can pass on [to their heirs] a small business or a family farm.”

And Gore, like Clinton, has sought to make the case that the tax-cut measures promoted by Bush and GOP congressional leaders are skewed toward the wealthy.

Even if the House had overridden Clinton’s veto of the estate tax bill, the measure likely would have been thwarted in the Senate. The legislation passed the Senate in July on a 59-39 vote, shy of the two-thirds margin needed to override.

When the bill came before the House in June, it passed by more than a two-thirds majority--279 to 136--with 65 Democrats joining with Republicans to vote for it. But many lawmakers were absent--including several Democrats who opposed it.

As Thursday’s vote neared, Clinton and Democratic leaders made clear that they wanted to avoid the political embarrassment of a veto override just two months before the election. They moved aggressively to ensure better attendance by Democrats opposing the bill and to twist the arms of those who had voted for it.

Rep. Zoe Lofgren (D-San Jose), who backed the measure in June, agreed to support Clinton after the president called her Thursday. The president assured Lofgren that he would work to provide relief for taxpayers in her Silicon Valley district and elsewhere who have seen their real estate values soar.

One Democrat who refused to change his vote was Rep. Harold E. Ford Jr. (D-Tenn.), a close ally of Gore who was keynote speaker at the party’s national convention. Ford, like the entire Tennessee delegation, had voted for the estate tax repeal. He refused to support the president’s veto--despite heavy lobbying by White House officials, Gore aides and the Democratic leadership--because, he said, the Democratic alternative did not go far enough to reverse a tax he considers “unfair and senseless.”

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How Calif. Democrats Voted on Veto

Thirteen House Democrats who in June backed the bill to abolish the estate tax switched positions Thursday and voted to sustain President Clinton’s veto of the measure. Here is how California House Democrats who had favored the bill voted on the veto.

Voting to sustain: Joe Baca (Rialto), Anna G. Eshoo (Atherton), Sam Farr (Carmel), Tom Lantos (San Mateo), Zoe Lofgren (San Jose).

Voting to override: Lois Capps (Santa Barbara), Gary A. Condit (Ceres), Calvin M. Dooley (Visalia), Loretta Sanchez (Garden Grove), Ellen O. Tauscher (Pleasanton), Mike Thompson (St. Helena).

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DEATH AND TAXES

The estate tax has excited a lot of debate lately--much of it focused on the wrong issues. C4