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Lobbyists for small businesses, construction companies, manufacturers and other trade groups are racing the clock to convince Congress to reinstate the federal estate tax they’ve fought for years to abolish.

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Business Lobbyists Push to Revive Estate Tax They Tried to Kill

 

 

March 8 (Bloomberg) -- Lobbyists for small businesses, construction companies, manufacturers and other trade groups are racing the clock to convince Congress to reinstate the federal estate tax they've fought for years to abolish.

The National Federation of Independent Business and more than 40 business organizations wrote Senate and House leaders last week asking for quick action on a proposed 35 percent levy on inheritances worth more than $10 million per couple. The Associated General Contractors of America is urging members to contact lawmakers about the plan.

\The groups have changed positions in a bid to head off higher taxes on the horizon: Unless Congress acts, current law would raise the tax next year to 55 percent on estates after they exceed $2 million per couple, from nothing this year.

"Clearly, we can't live with what's going to come in 2011," said Chris Walters, an estate-tax lobbyist in Washington for NFIB, the trade group for small businesses.

The debate stems from a 2001 Republican tax-cut bill that gradually reduced estate taxes over a decade until the levy was replaced for 2010 by a capital-gains tax on sales of some inherited assets. Starting next year, however, inheritance taxes would revert to pre-2001 levels.

The clock is ticking on estate-tax changes because, as 2011 nears, so does the prospect that congressional inaction would start to bring in billions of dollars to help reduce trillion- dollar deficits.

Difficult to Change

"That's the real fear," said Rosemary Becchi, who lobbies on tax issues for Washington-based Patton Boggs LLP, the top lobbying firm by revenue. "Then it becomes extremely difficult to change it."

The nonpartisan Tax Policy Center in Washington estimated that a revived estate tax at pre-2001 levels would collect more than $34 billion next year and about $410 billion through 2019.

Arizona Republican Senator Jon Kyl and Arkansas Democratic Senator Blanche Lincoln have proposed setting the rate at 35 percent, retroactive to Jan. 1. The measure would apply to the portion of estates that exceed $10 million per couple, and would adjust that exemption for inflation in later years. The sponsors are negotiating with Senate leaders on ways to bring the plan to the floor for a vote, said Scott Allen, a spokesman for Lincoln.

"It is imperative that we come to a resolution on this issue quickly," Allen said.

House Democrats voted in December to extend the 2009 rate of 45 percent on married couples' estates after a $7 million exemption. Senate Republicans blocked action in that chamber. President Barack Obama's proposed budget for 2011 presumes revenue from a 45 percent tax.

‘Sweet Spot'

A 35 percent rate "is really that sort of sweet spot of what's acceptable to all sides," said Dena Battle, director of tax policy for Washington-based National Association of Manufacturers. "We don't want to see the tax go up to 55. We didn't want to see the tax at 45."

The longer Congress delays action, bringing a 55 percent tax closer to reality, the fewer reasons Democrats have to consider Kyl's and Lincoln's 35 percent alternative, said Jeff Shoaf, senior executive director for government affairs at Arlington, Virginia-based Associated General Contractors.

Senate Majority Leader Harry Reid, a Nevada Democrat, is "very reluctant to bring this up at this point," Shoaf said. "The closer we get to the deadline, the stronger his hand is."

Leverage Waning

Estate-tax opponents "had leverage" in the policy debate when Democratic leaders were trying to keep the tax from disappearing at the beginning of the year, said Chuck Marr, director of federal tax policy for the Center on Budget and Policy Priorities, a nonpartisan Washington research group. "That will wane as the year goes on."

On the other hand, Democrats have some incentive to act soon because, as more time passes, it becomes harder to reinstate the tax retroactively for 2010, Becchi said. The plan backed by Kyl and Lincoln would raise $9 billion this year, according to the Tax Policy Center. A 45 percent tax would bring in about $15 billion.

Republicans and business lobbyists, such as the U.S. Chamber of Commerce, have tried for years to abolish the estate tax, saying it hurts small-business owners and family farmers. Last September, 46 groups, including the manufacturers association and the American Farm Bureau Federation, started pushing for a 35 percent tax as an alternative to reinstating pre-2001 levels.

Tax Revenue

With multimillion-dollar exemptions, a small percentage of the U.S. population would be covered by proposals in Congress. The legislation pushed by Kyl and Lincoln, exempting $10 million per couple from taxation, would affect 3,030 taxpayers this year, including 310 business owners or farmers, according to Tax Policy Center estimates.

Business leaders said support for a permanent, lower tax rate represents an acknowledgement that Democratic majorities in Congress aren't likely to eliminate a levy that brought in about $26 billion in 2008, according to the Internal Revenue Service.

"In this current political environment, permanent elimination of the estate tax is not going to happen," said Charles Symington, senior vice president for government affairs at the Alexandria, Virginia-based Independent Insurance Agents & Brokers of America.


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