Estate Tax Update

Davis Sponsors Estate Tax Measure, But With Low Profile

By Peter Cohn

Running for statewide office can often create nuanced positions, and the estate tax appears to be one of those issues for Alabama Democratic Rep. Artur Davis, who is running for governor.

On Friday, a bipartisan House coalition announced they had introduced legislation to gradually cut the estate tax from its current 45 percent rate to 35 percent, as well as phase in a higher exemption from the tax, to $5 million per person from the current $3.5 million.

Davis was among the original sponsors. But he declined to tout his involvement in a joint release issued by the bill's backers, which was not lost on Republicans.

"I am sure Davis' run for the governor's mansion in Alabama factored into his team's decision, but why he wouldn't want to promote bipartisan legislation that helps small businesses and farmers keep more of their money is beyond me," one GOP aide said.

The lead Democratic co-sponsor is Rep. Shelley Berkley of Nevada, a longtime opponent of the estate tax who has consistently supported its repeal. Republican co-sponsors are Reps. Kevin Brady of Texas and Devin Nunes of California.

The bill represents a compromise between estate tax foes who have long sought full repeal, and a permanent extension at the 2009 rate sought by President Obama and Democratic leaders in Congress.

Davis has opposed efforts to repeal the tax in the past, and in 2006, he voted to strip a provision from a larger tax and minimum-wage bill that stopped short of full repeal but would have cut the estate tax more deeply than is now contemplated.

Recognizing that full repeal is a non-starter in Democratic-controlled Washington, longtime estate tax opponents such as the National Federation of Independent Business and American Farm Bureau Federation have thrown their weight behind the Berkley-Brady effort. The measure is similar to a bipartisan Senate proposal from Senate Agriculture Chairwoman Blanche Lincoln and Minority Whip Kyl.

But progressive groups and unions oppose the bill as a sop to the wealthy, and are urging Congress to let the estate tax go back to the pre-2001 rate of 55 percent, with an exemption of only $1 million, as scheduled in 2011. Even Obama's proposal to keep the current estate tax would cost $500 billion more over the 10 years beginning in 2011 than reverting back to the Clinton-era rate, said Lee Farris, senior organizer on estate tax policy at United for a Fair Economy.

Davis' spokeswoman Addie Whisenant said the lawmaker "has consistently supported reducing the estate tax burden that will hit certain families after 2011." She said Davis has opposed efforts to further cut the tax since they would have added too much to the deficit.

The new bipartisan bill, Whisenant said, "will prevent families who may have suffered substantial losses in the stock market and in their 401(k)s from the extra burden of a huge tax hike in the next few years." She added that Davis decided not to be on the joint release issued by Berkley, Brady and Nunes "because we wanted to focus our efforts on local press as opposed to national press."

Regardless of the group's efforts, they are not expected to get a vote on their bill. The House next week will take up a permanent extension of the estate tax at 2009 rates, at a $233.6 billion cost. The measure is expected to go straight to the floor without a vote in the Ways and Means Committee, on which Berkley, Davis, Brady and Nunes sit.

The Senate is not expected to pass the bill, however, and Democrats are likely to fall back later in the year on a simple one-year extension of the 2009 estate tax rate.

That outcome is fine with Farris, who noted that will punt the long-term question into next year, when Congress is faced with whether and how to extend all of the 2001 and 2003 tax cuts. With lawmakers staring at a more-than-trillion-dollar deficit, at that point "the estate tax will look like a good place to raise revenue" and negotiate a higher rate and lower exemption than the 2009 estate tax, she said.

"It's not going to be a good time to pass a tax cut for a few super-wealthy families, and maybe we'll be able to get back to more broadly shared prosperity and begin to rebuild the middle class," Farris said, adding: "After Wall Street wrecked the economy and Washington bailed out the banks, it would be crazy to weaken the estate tax and give away all that money to the super-wealthy."

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