The Levy Must Die
Opponents of repeal are gathering steam.

March 1, 2001 9:30 a.m.

ast year, over President Clinton's objection, Congress easily passed legislation to eliminate the death tax, with the

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support of 65 House Democrats and nine Democratic senators. It should now be smooth sailing for the popular measure spearheaded by President Bush, but over the past few weeks, changes on both ends of Capitol Hill have given new life to death-tax defenders.

With a president only too happy to host a rose-garden signing ceremony, members of Congress no longer have a free vote in favor of burying the death tax, and opponents of elimination who in the past relied on a presidential veto have mounted a spirited campaign to preserve the tax. They will have plenty of time to make their case because the priority given to income-tax rate cuts means that elimination of the death tax is scheduled for the second phase of the GOP's tax-relief agenda.

Only about 2 percent of estates are subject to a levy, ranging from 37 to 55 percent, imposed on assets worth more than $675,000, but thousands of others spend thousands of dollars to avoid a tax generally viewed as an unfair double (or triple) taxation. In a recent survey by the polling company for 60 Plus Association, 77 percent of the public favored immediate repeal of the death tax.

In the first instance of a Bush administration official singing from a different song sheet, John DiIulio in early February expressed his support for only a modification in the tax. The University of Pennsylvania professor, who had just been tapped to head the president's new office of faith-based initiatives, expressed the concern that its outright repeal would reduce charitable giving.

Now, an elite group advocating for a tax it has no intention of paying agrees with DiIulio. In mid-February, over 200

“Charities don't benefit from the death tax, but other interests clearly do.”

wealthy individuals, including William H. Gates Sr., George Soros, Ben Cohen of Ben & Jerry's, plus a couple of Rockefellers, devoted some of their pocket change to taking out newspaper ads opposing the repeal of the death tax on the grounds that it would eliminate a powerful incentive to donate to charity. But supporters of repeal aren't overly worried by the billionaires' caucus. Dan Danner, vice president of the National Federation of Independent Business, reports that his members are more energized in favor of repeal as a result of the effort led by the senior Mr. Gates.

Mr. Danner wonders who in the billionaires' pro-death-tax lobby doesn't spend a penny on financial planners, but blithely acquiesces in a government grab of 55 percent of his assets. He also explains that his small-business owners recognize that someone with $10 billion can give away half and still be left with a tidy sum.

There is little reason to be concerned that a total repeal of the death tax will inhibit charitable giving. Charitable donations, from all donors including bequests, increased following the 1981 and 1986 federal tax cuts. In fact, President Reagan's economic agenda was a boon for charities, which saw their donations increase by 16 percent between 1980 and 1986. Individuals shared their income gains with charities, and less money siphoned off by taxation allowed for larger gifts.

Experts in philanthropy at Boston College's Social Welfare Research Institute predict that elimination of the death tax will spur the growth of national and personal wealth while encouraging Americans to give out of the goodness of their hearts, not simply to dodge an annoying tax. And Americans have become increasingly generous in recent years. From 1992 to 1997, while the value of estates with a surviving spouse grew 65 percent and bequests to heirs rose 57 percent, charitable bequests rose by 110 percent.

Charities don't benefit from the death tax, but other interests clearly do. With the threat of a presidential signature this year, opponents of repeal are gathering steam. Many states have a death tax linked to the federal version and some of them are now objecting to the potential loss of state revenues. Elsewhere, a coalition called Americans for Sensible Estate Tax solutions, backed by life-insurance underwriters, is organizing a raft of charities, universities, and states to fight elimination of the death tax. Life-insurance companies presumably think it's "sensible" to buy expensive policies to pay off estate taxes, rather than force heirs to sell family farms and businesses to pay Uncle Sam.

Nervous supporters of the death tax's repeal have watched their adversaries push for a modification of the tax, only to see little response from the White House. Enemies of repeal have started a coalition of their own which met at the White House at the end of February. About 20 different groups are represented in the coalition. But a confident Mr. Danner of the NFIB says, "The President couldn't have been clearer, the estate tax should be eliminated."

Rep. Jennifer Dunn (R., Wash.), who is the chief House sponsor of the death-tax repeal bills that have previously passed Congress, is also convinced that President Bush remains "absolutely committed to repeal." She is aware of her opponents' stepped-up assault, and the fact that GOP tax relief no longer just weds death tax repeal to marriage-penalty relief, but now includes a more ambitious goal of across-the-board rate cuts. The rate cuts leave $600 billion for other relief. Rep. Dunn's bill doubles the size of exempted estates to $1.3 million, and phases out the estate tax over 10 years at a potential cost of about $200 billion.

In the judgment of one White House aide, President Bush is winning the tax battle. This aide was delighted to see a Saturday Night Live spoof about the president feature the poster-sized check for $1,600 that Bush uses to illustrate his plan's effect on the average family, because that's "break-through." He allows that the recent assault on repeal of the death tax has gone unanswered, but explains that the staff is still learning how to use the White House microphone. "The President is responsible for everything, but can't talk about everything all the time."

President Bush will triumphantly sign a tax cut this year. Whether it includes a full repeal of the death tax will depend on how George Bush defines victory.