House passes two tax-reform bills

The House of Representatives approved two bills Thursday that would repeal the estate tax and make permanent deductions for state and local sales taxes. But the bills face a challenge in the Senate and opposition from the White House.
Lawmakers passed the estate tax bill 240-179 and the sales tax legislation 272-152, with votes that fell short of the number needed to override a veto.
Earlier in the week, the White House came out against both bills. The administration argued that rescinding the estate tax helps only the wealthiest Americans and that both bills would add substantially to the federal deficit because neither is offset by tax increases or spending cuts.
Republicans asserted that removing the estate tax from the code would enable farmers, ranchers and small-business owners to pass their operations on to family members.
“This is the American Dream,” Rep. Kevin Brady, R-Texas, author of the bill, said during floor debate. “At the end of the day, it’s a simple question … Whose money is it?”
Democrats countered that the bill would give well-off taxpayers a break while robbing funds that could be used on infrastructure, research and other spending.
“We’re all working hard, but some have more luck than others,” Rep. Jim McDermott, D-Wash., said during the floor debate. “Think about the 99.8% of Americans who will get no benefit” from the bill.
Both bills now go to the Senate, where Republicans hold 54 seats — six fewer than is needed to overcome a filibuster.
“We need a handful of senators to send the bill to the president,” said Palmer Schoening, chairman of the Family Business Coalition, which has helped lead the effort to pass the estate-tax legislation.
BUILDS MOMENTUM
Even though President Barack Obama would ultimately kill the bill, the House vote builds momentum for an estate tax repeal that could become part of broader tax reform down the road, according to Mr. Schoening.
“It was definitely a positive step forward for the death-tax-repeal movement,” he said.
In addition to eliminating the estate tax, the bill would maintain stepped-up basis for calculating inherited assets. Under that process, heirs don’t have to pay taxes on the capital gains. It also would lower the top gift tax rate to 35%, down from the current 40%, and provide a lifetime gift tax exemption of $5 million.
The administration criticized the measure for keeping stepped-up basis intact.
The bill “would endorse the principle that the wealthiest Americans should not have to pay tax on certain forms of income at all,” the Office of Management and Budget said in a Statement of Administration Policy.
The state sales tax bill is designed to make permanent a tax break that usually expires each year and has to be renewed at the last minute by Congress before tax-filing season.
The measure would “support middle-class families” by “removing the asterisk” and allowing residents of states without an income tax to deduct state sales taxes, Mr. Brady said.
Democrats chided Republicans for advancing piecemeal permanent fixes in the tax code instead of tackling broad reform.
“Let’s get tax reform done and stop procrastinating in front of the American people,” Rep. Richard Neal, D-Mass., said during floor debate.