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Showdown Over Estate Tax Threatens Tax-Cut Compromise

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With less than two weeks left until the Bush tax cuts are scheduled to expire, the House of Representatives will vote Thursday on a compromise package negotiated between President Obama and Senate Republicans to temporarily extend current tax rates, while also extending unemployment benefits for 13 months. But not before voting on an amendment to the package that could unravel the entire deal.

Although the Senate passed the compromise measure by a vote of 81 to 19 on Wednesday, House Democrats have remained defiant toward the White House over what they say were unnecessary giveaways from the president to Republicans in the negotiating process, including extending income tax rates for high earners and setting the estate tax at 35 percent for estates' valued over $5 million.

Earl Pomeroy, tax cutsAs a result, the House Rules Committee agreed Wednesday night that the House will take up an amendment to modify the estate-tax piece of the package before the chamber votes on final passage of the overall tax-cut compromise Thursday afternoon.

The amendment, offered by Rep. Earl Pomeroy (D-N.D.), would set the estate tax at 45 percent, with an exemption of $3.5 million, just as the House voted to do in 2009. Pomeroy estimated that the change would affect 6,600 estates in 2011 and would cut $23 billion from the cost of the roughly $900 billion package over two years.

Republicans at the rules committee hearing Wednesday argued that the $3.5 million threshold would still subject family farms and businesses to liquidation if the owner dies and his or her children cannot pay the taxes on the estate.

If the House approves the amendment Thursday, it could threaten the future of the entire package, since the amended bill will have to go back to the Senate for approval, where Republican senators have already said they are not interested in renegotiating the deal they struck with the president.

"Now it's up to our colleagues in the House, and we urge Democrat leaders to resist playing political games and making partisan changes so that American taxpayers won't be hit with a huge, job-killing tax hike on January 1," Senate Minority Leader Mitch McConnell warned after the Senate approved the bill Wednesday.

But angering Republican senators is a risk Pomeroy said he's willing to take.

"Would they have taxes go up on everyone just because they want to take care of that wealthy, that little estate-tax exclusion exposure for the wealthiest 6,600 families in this country?" Pomeroy said Wednesday in an interview with PBS's "NewsHour." "We think that we improve the package by making the amendment in order and approved."

Speaking from the White House Wednesday, the president urged lawmakers not to delay the bill any further.

"I know there are different aspects of this plan to which members of Congress on both sides of the aisle object," he said. "That's the nature of compromise. But we worked hard to negotiate an agreement that's a win for middle-class families and a win for our economy, and we can't afford to let it fall victim to either delay or defeat."
Filed Under: The Capitolist

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Kenneth

There should have never been an estate tax. You work so hard during your life to make a better life for your family and gain assets along the way that will gain in value for the purpose to leave to your children. Why should they have to be taxed on the value of the will you are leaving. This would only cause to start adding their childrens names to things before they die so they would have ownership.

December 16 2010 at 1:20 PM Report abuse +7 rate up rate down Reply
1 reply to Kenneth's comment
Tom

You can now give away a fixed amount of your accumulated wealth to your heirs and others. Not sure of the limits or timing, I consider them quite a good way to get around the "final solution". Why wait, greedy or controlling???

December 16 2010 at 6:32 PM Report abuse -2 rate up rate down Reply
Kenneth

If the house turns it down then just wait until Jan 3 and bring it up for a vote.

December 16 2010 at 1:16 PM Report abuse +8 rate up rate down Reply
John Vilvens

Who is taking everybody hostage this time. Democrats are you calling farmers the enemy now. Dairy farmers works 7 days a week to earn a living. With cows, equipment, land, barnes and milk house. Thier farm would be valued higher than that. But they make very little money so thier children would lose or have to sell the business to pay the death tax. They have payed taxes thier whole life to see government take it from thier children. This is evil

December 16 2010 at 1:15 PM Report abuse +6 rate up rate down Reply
1 reply to John Vilvens's comment
Plesko

I agree the estate tax is ridiculous no government should be allowed to tax what has already been taxed local, state and the fed period. But I must add these farmers get fedral subsidies corresponding to there size and build wealth off the tax payers back which should be stopped. We the people pay subsidies for more and more businesses even to relocate overseas hence free market?

December 22 2010 at 6:49 PM Report abuse rate up rate down Reply
yooper959

Obama may need to delay his Hawaii vacation; but I think he will make his negotiated deal stick.

December 16 2010 at 12:45 PM Report abuse -1 rate up rate down Reply
motorprops

It is time to stand up to the Republicans who have made it clear that they do not care about 98% of the people in this country. If they could raise taxes on the working 98% and end all taxes on the richest 2% thats what they would do. It is time for the 2% that get the most from the gov't to start paying their fair share.

December 16 2010 at 12:37 PM Report abuse -10 rate up rate down Reply
2 replies to motorprops's comment
akissmybass45

right on the money mr motorprops

December 16 2010 at 1:06 PM Report abuse -6 rate up rate down Reply
jimfurl179

Actually its quite clear the Democrats in the House are the obstructionists. A bill was sent to them that was negotiated by THEIR President and passed the Senate 81-19 with bi-partisan support. Now Speaker Pelosi refuses to allow that bill to advance for an up or down vote. It seems the Democrats are really the "Party of NO".

December 16 2010 at 1:14 PM Report abuse +5 rate up rate down Reply
Rob & Kathy

When beneficiaries have to sell their inherited property to pay taxes to the government, something is seriously wrong...

December 16 2010 at 12:20 PM Report abuse +10 rate up rate down Reply
3 replies to Rob & Kathy's comment
joper201

Obama shook hands on this deal. Like world leaders, his own Party does not respect him enough to honor his deal.

December 16 2010 at 12:10 PM Report abuse +4 rate up rate down Reply
1 reply to joper201's comment
hdvh56

Aaaa,maybe its a bad deal?

December 16 2010 at 12:49 PM Report abuse -2 rate up rate down Reply
campwmr

Rule One in the art of the compromise - Make sure all parties to the deal are involved in making the deal. The White House foolishly made this deal with Senate Republicans, without any involvement of House Democrats. It is a fiscally irresponsible deal to give any tax cuts at a time of massive budget deficits. The deal should be voted down - period.

December 16 2010 at 10:09 AM Report abuse rate up rate down Reply
terrykayden

There should be NO estate tax. If it was earned it should be able to be passed on without the government taking 35 - 45 % Once again it's the government taking something they don't deserve to spend on something they don't need.

December 16 2010 at 9:45 AM Report abuse +1 rate up rate down Reply

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