Estate-tax foes warm to offer of reduction in rates

WASHINGTON — Some of the staunchest advocates of eliminating estate taxes said Wednesday they could accept, with some reservations, a compromise that stops short of complete repeal.

"It's hard to get excited about it," said Pat Toomey, president of the conservative Club for Growth. "I suppose, on balance, it's better to have this than not to have it."

The reduction under consideration, scheduled for House debate today, would rewrite estate-tax rates in 2010 and beyond.

It responds to a quirky and temporary law, part of President Bush's first tax cut, that erases estate taxes in 2010 and revives them a year later.

The chairman of the House Ways and Means Committee recommended rewriting that law by exempting $5 million of an individual's estate, and $10 million of a couple's, from taxation beginning in 2010. Rep. Bill Thomas, R-Calif., would let a surviving spouse use any unused portion of an exemption left by a deceased spouse.

Under that plan, an estate worth up to $25 million would be taxed at capital-gains rates, currently 15 percent and scheduled to increase to 20 percent in 2011. Estates worth $25 million or more would be taxed at twice capital-gains rates.

Some farm and business advocates said they could accept the proposed estate reduction because it will make family financial planning easier.

"Our members would like something to happen this year," said Pat Wolff, tax specialist at the American Farm Bureau Federation.

Under current law, $2 million of an individual's estate and $4 million of a couple's escapes taxation. The remainder can be taxed at a rate as high as 46 percent.

Critics say families are forced into costly estate planning and insurance to avoid being taxed.

According to the most recent Internal Revenue Service statistics, 1.17 percent of people who died in 2002 left a taxable estate.