House votes to extend inheritance tax on wealthy estates, canceling one-year repeal in 2010

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House votes to extend tax on wealthy estates

WASHINGTON — The House voted Thursday to indefinitely extend a 45 percent inheritance tax on estates larger than $3.5 million, canceling a one-year repeal of the tax set to begin next month.

A similar effort is afoot in the Senate, but the health care debate there could preclude action on the estate tax before Congress breaks later this month for holidays. There are also disagreements among senators over the tax rate and the size of estates that should be exempt, further clouding the bill’s prospects.

Under the House bill, which passed by a 225-200 vote, estates smaller than $3.5 million would continue to be exempt from the tax. Married couples, with a little estate planning, could exempt a total of $7 million. That leaves less than 1 percent of all estates subject to the tax.

Majority Democrats argued that a permanent tax rate makes it easier for families and small business owners to do estate planning, noting that fewer than 1 percent of all estates are subject to the tax.

“In America, it’s not a sin to be rich nor is it a crime to die rich,” said Rep. Jared Polis, D-Colo. “This bill gives our nation’s wealthiest families the ability to know exactly what their obligation to the nation that fostered their wealth will be, and it is fair and it is just.”

The bill follows the federal budget proposed by President Barack Obama. But many Republicans called for permanent repeal of the estate tax, arguing it hurts families that pass down farms and small businesses to their children.

“The majority claims to be offering certainty to taxpayers and I suppose in a way they are — they are certainly repealing the hope of ever eliminating the death tax,” said Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee.

Under current law, the federal estate tax is scheduled to temporarily disappear next year before returning in 2011 at an even higher 55 percent rate. During the year without an estate tax, all estates would be subject to a 15 percent capital gains tax that they now avoid.