Video: Bill on estate tax, minimum wage dies

updated 8/3/2006 11:53:53 PM ET 2006-08-04T03:53:53

A Republican election-year effort to fuse a cut in inheritance taxes on multimillion-dollar estates with the first minimum wage increase in nearly a decade was rejected by the Senate late Thursday.

Republicans needed 60 votes to advance their bill, which links a $2.10 increase in the $5.15 federal minimum wage over three years to reductions an estate taxes next decade. Passed by the House last Saturday, the bill got a 56-42 vote, four votes short of succeeding.

For Republicans, the combination could have neutralized a Democratic campaign issue while also advancing an estate tax cut, a priority that may have an uncertain future if the GOP loses seats in Congress in November’s election.

The GOP strategy put Democrats in an uncomfortable position. Either they could vote against the bill — thus rejecting a minimum wage increase — or they could vote for it — thus agreeing to cut taxes on multimillion-dollar estates. Most rejected the bill, blocking a GOP victory months before the election.

Bill likened to race-track betting
Senate Finance Committee Chairman Charles Grassley, R-Iowa, likened the minimum wage and estate tax bill to “a long-shot” bet on racing horses.

“Once they’re out of the barn and running around, it’s kind of hard to turn them around,” he said. “Senators can be similar, espcially when a vote is highly political.”

Republicans were dealt a blow when two Democrats, Sens. Maria Cantwell and Patty Murray, both of Washington, announced they planned to oppose the GOP’s bill.

“This is a cynical ploy on the part of the Republican leadership in an election year,” Cantwell said in a statement.

Senate Majority Leader Bill Frist, R-Tenn., had tried repeatedly this year to repeal or reduce the estate tax, derided as the “death tax” by its opponents.

“This death tax punishes everyday Americans by forcing them to give up their business, to give up their farms,” he said.

An earlier bid to move an estate tax bill to debate fell three votes short of succeeding. First and House Republican leaders had hoped adding the minimum wage, along with a package of popular tax cuts, could carry it to passage.

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Among other things, the bill resurrects deductions that expired last year for state sales taxes, tuition and teachers’ classroom supply purchases, along with a business research and development credit.

Enticements for Democrats
The bill had extra items to entice Democrats who were uneasy about voting for the estate tax reductions. The add-ons included a cut in timber capital gains taxes, rural development incentives and a program cleaning up abandoned coal mines.

Democrats criticized the GOP for only agreeing to increase the minimum wage to $7.25 over three years by attaching it to an estate tax cut, and they said voters will understand the Democratic opposition, even though it means rejecting a higher minimum wage.

“The American people won’t fall for it,” said Senate Minority Leader Harry Reid, D-Nev.

Under President Bush’s first tax cut, the estate tax shrinks through this decade and disappears in 2010. It reappears at older and higher rates in 2011.

The estate tax and minimum wage bill would, by 2015, increase the amount of an estate exempt from taxation to $5 million for an individual and $10 million for a couple. Estates worth up to $25 million would be taxed at capital gains rates, currently 15 percent and scheduled to increase to 20 percent. The top tax rate on larger estates would fall to 30 percent by 2015.

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