WASHINGTON -- The House voted Thursday to repeal the 99-year-old U.S. estate tax, part of a partisan clash over whether the government should break up concentrated wealth or make it easier to pass along assets to the next generation.
The House passed the bill 240-179 Thursday. The tally was mostly along party lines; seven Democrats voted for passage and three Republicans voted no. The four Republican representatives from Arkansas voted in favor of the repeal.
The measure would make it possible for the wealthiest Americans to do what the other 99.8 percent already can do -- pass their assets to their children without a federal estate tax. The measure would save taxpayers and reduce U.S. government revenue by $269 billion over a decade.
"It is, at its heart, an immoral tax," said Rep. Kevin Brady, R-Texas.
A Senate test vote on the measure last month came up six votes short of the 60 needed to overcome a Democratic filibuster. President Barack Obama has threatened to veto the bill, noting that the Republican budget plan adopted by the House in March relies on revenue from the estate tax.
The tax -- which Republicans have dubbed the "death tax" -- evokes strong opinions on both sides of the aisle, which were evident during floor debate on the measure.
Republicans said taxing estates upon death punishes success, imposes double taxation and hurts family-owned businesses. They said it's particularly damaging to farmers who are asset-rich and cash-poor and to entrepreneurs from minority groups with first-generation wealth.
"It penalizes those who have worked all their lives and reinvested in their family businesses," said Rep. Adrian Smith, R-Neb.
A study by the congressional Joint Committee on Taxation found that 89 percent of estates with farm property in 2011 were "well-funded," or had enough liquid assets to pay the estate tax, mortgages and liens. Among the taxable estates with farm property, 77 percent were well-funded.
Democrats said Republicans were handing a tax break worth billions of dollars to just a few households and pointed to existing rules that give farms and businesses up to 15 years to pay the tax.
"Republicans are helping the rich get richer," said Rep. Jim McDermott of Washington. "Repealing the estate tax will surely sow the seeds of a permanent aristocracy in this country."
After two decades of Republican success in narrowing the estate tax, Americans now have a $5.43 million per-person exemption from the 40 percent tax. As a result, only about 5,500 U.S. estates a year pay the estate tax, though more than that are affected by the levy and create financial plans to avoid it.
Thursday's vote in the House marked the first on estate-tax repeal since 2005. More than half of the House members have been elected since then and hadn't taken a position on the issue.
Unlike previous versions, the bill passed by the House wouldn't require heirs to pay capital-gains taxes on the increased value of assets over the deceased's life. The measure would let families pass assets across generations and avoid capital-gains taxes on real gains and so-called phantom income attributed to inflation.
Heirs would have to pay capital-gains taxes only on any gain in value after they inherit the property and only if they choose to sell. As a result, for people who don't have to sell, the measure effectively repeals the capital-gains tax.
In another tax matter Thursday, the House voted to let taxpayers deduct state sales taxes on their federal returns.
The 272-152 vote would reinstate a tax break that expired at the end of 2014 and make it a permanent feature of U.S. tax law. The bill would save taxpayers and reduce federal revenue by $42.4 billion over the next decade.
Seven states lack an income tax: Texas, Florida, Washington, Alaska, South Dakota, Nevada and Wyoming. In addition, Tennessee and New Hampshire don't tax wages yet tax other types of income, such as interest and dividends.
The issue is a priority for lawmakers from those states, who say it's unfair that state income taxes are deductible under permanent law and sales taxes aren't. There are 60 Republican House lawmakers from the nine states, or 25 percent of the party members in the chamber.
There were 34 Democrats who voted for the bill, and 24 of those represent states without income taxes. Just one Republican voted against the measure; all four representatives from Arkansas supported it.
Obama has threatened to veto the bill because it lacks offsets to prevent the federal budget deficit from widening.
A Section on 04/17/2015