Pressure builds as estate-tax vote looms

WASHINGTON — Senate Republicans are preparing to bring the partial repeal of the federal estate tax to a vote this month, adding sweeteners to the legislation that put new pressure on Washington Democrats Maria Cantwell and Patty Murray.

As bait, GOP leaders may offer two incentives important to the state: tax breaks for timber companies, including the Federal Way-based Weyerhaeuser, and deductibility of the state sales tax from federal income taxes.

The timber-tax breaks were included in an estate-tax bill that passed the House last month.

Sens. Murray and Cantwell have both pushed for the timber- and sales-tax issues in recent months — independent of the estate-tax legislation.

The two lawmakers are viewed as possible swing votes on the estate tax, though they have consistently opposed its total repeal. Their recent statements indicate they are not budging yet.

Cantwell, who is running for re-election, has received a barrage of e-mail and calls from people on both sides of the issue.

One of the most influential advocacy groups that favors retaining the estate tax, United for a Fair Economy, has had extensive contact with Cantwell and her staff and has lobbied her via prominent state Democrats.

"We have a message going to Sen. Cantwell that it won't help her with her base to take a 'Republican lite' position on this," said Lee Farris, United for a Fair Economy's senior official on estate-tax policy.

Last week, United for a Fair Economy took out ads in Seattle newspapers asking Murray and Cantwell to hold firm against repealing the tax.

Seattle Times Publisher Frank Blethen, a national leader against the estate tax, said he visited the Washington, D.C., offices of Murray and Cantwell in May during the annual "Death Tax Summit." The conference was widely attended by pro-business and anti-tax groups and their supporters from Congress.

"I have not focused on the timber-tax incentive, but if it will help, and help the state, I'm all for it," said Blethen, who argues that the estate tax threatens family ownership of companies.

In a written statement this week, Cantwell said, "Making my state sales-tax deduction permanent for Washington state continues to be one of my top priorities for delivering tax fairness to Washington state. But any estate-tax reform has to be evaluated in its entirety."

She added, "I do not support the House-passed bill."

The House version exempts most estates worth less than $10 million, and significantly cuts tax rates on those worth more than $25 million.

Murray has not changed her position on the tax, her staff said.

"Senator Murray has grave concerns about how we can pay for estate-tax reductions at a time of war in deficit spending," spokeswoman Alex Glass said.

Repealing the entire tax would cost the government more than $70 billion a year by 2015, according to the congressional Joint Committee on Taxation.

"The sales-tax deductibility is incredibly important for Washington state residents and tax parity for many states across the nation," Glass said. "But we still haven't seen concrete details and we've heard promises in the past."

Still, the GOP's tax-incentive gambit appears to be paying off: Democratic Rep. Brian Baird of Vancouver, who had opposed estate-tax repeal, voted for the House version in June, partly because of the timber-tax provision.

"This estate-tax-reform bill was not perfect," he said. "I would have liked to have seen it include higher tax rates on larger estates. But it was a good compromise."

Baird said he was moved to support the bill by local business owners, such as the Corwin family, who has a Pepsi distribution operation in Ridgefield, Clark County, and the Thoeny family farmers in Woodland, Cowlitz County.

He added that Weyerhaeuser's largest timberland holdings are in his district.

In May, GOP leaders in Congress received a letter from Murray, Cantwell and most of the Washington delegation asking for the timber-tax relief provision.

Roughly $940 million in timber-tax breaks were added to the House estate-tax bill a few weeks later. It passed the House on June 22.

As the bill moved to the Senate side, Cantwell said the timber sweeteners were nice, but she's more focused on restoring state sales-tax deductibility for Washington residents. The deduction expired last December.

Very quickly, Senate staff spread the word that Senate Majority leader Bill Frist of Tennessee might add the state sales-tax lure in his version of the bill. On Monday, Frist said he was still looking for the best bill likely to garner enough votes.

Republicans also may consider attaching the estate-tax measure to a bill that would strengthen the rules for how much money companies must maintain in employee pension accounts. That bill is being worked out in a joint Senate-House committee report, which cannot be filibustered.

In early June, a filibuster supported by Cantwell and Murray stopped a Senate Republican attempt to repeal the entire estate tax.

Republican Mike McGavick, Cantwell's opponent this fall, supports estate-tax repeal and has attracted business backing for his position.

Dan Clifton, chief economist for the conservative group Americans for Tax Reform, said polling shows 60 percent of people want to eliminate what he calls the death tax.

He warned that his organization "will have phones ringing off the hook in Cantwell and Murray's D.C. and district offices and people showing up at town-hall meetings across the state to tell the senators how they feel about the death tax."

Murray's office said the estate tax is not a top issue with her constituents, compared with the war in Iraq or the rising costs of health care and gasoline.

But that could change this fall, said the head of one of the largest anti-estate-tax groups.

Richard Patten, director of The American Family Business Institute and a former Seattle-area businessman, noted that an initiative to kill Washington state's own estate tax will be on the November ballot.

"In Washington state, the estate tax will become even more of a target, creating buzz," Patten said. "It will make it more difficult for Cantwell to dodge the issue."

Alicia Mundy: 202-662-7457 or amundy@seattletimes.com