July 7, 2000

House repeals ‘Death Tax’

The U.S. House of Representatives, by a vote of 279-136, passed the Death Elimination Tax (H.R.8). In addition to repealing the “death tax” in 2010, the legislation retains stepped-up basis for up to $5.6 million of assets when the tax is repealed.

“It is a great victory for farmers and ranchers,” said Donald Patman, president of the Texas Farm Bureau. “The current estate tax burden makes it progressively more difficult for each succeeding generation to keep an agricultural operation going.”

Under the bill, all sizes of estates would retain stepped-up basis for $1.3 million in assets. If an estate were larger than $1.3 million, the heirs could choose which assets retain the stepped-up basis. There would be an additional $3 million of assets eligible for stepped-up basis on estates transferred between spouses, that would bring the total value of assets retaining stepped-up basis for spousal transfers to $4.3 million.

The bill also reduces all estate tax rates by 15 percent over 10 years and lowers the bottom effective rate from 37 percent to 18 percent.

The top rate is cut from 55 percent to 53 percent in 2001 and to 50 percent in 2002. All rates are reduced by 1 percent in 2003-2006, by 1.5 percent in 2007 and by 2 percent in 2008-2009. The unified credit is changed to an exemption in 2001, which lowers the bottom estate tax rate from 37 percent to 18 percent.

Similar legislation is under consideration in the Senate, where Texas’ senior senator, Phil Gramm, has made a priority of “death tax” elimination.

President Clinton maintained his threat to veto the legislation, saying it would cost the Treasury $750 billion in the 10 years after full repeal.