Compromise needed to trim estate taxes

THE ISSUE The Senate has blocked a vote on whether to repeal all inheritance taxes.

REFUSING to compromise, proponents of repealing inheritance taxes failed this week to end Senate debate and allow a vote on their proposal. Many family-owned businesses in Hawaii need relief from the taxes on wealth transferred from one generation to another, and they should be protected without rewarding the super-wealthy.

The House approved a repeal last year, rejecting a compromise to exempt taxes on estates of up to $3.5 million, or $7 million for a couple. That would exempt all but the wealthiest three-tenths of 1 percent of estates. Rep. Ed Case voted for the compromise amendment, opposed by Rep. Neil Abercrombie, but both voted in the end for the repeal.

Senate Republican Leader Bill Frist said after the House vote that he would assign Sen. Jon Kyl, R-Ariz., to work with Democrats to find a compromise. Instead, Frist resisted efforts to reduce the tax but not abolish it entirely and supported a full repeal. The 57 votes fell short of the 60 needed to prevent a filibuster on the measure. Senators Akaka and Inouye voted against repeal.

Senate Democratic Leader Harry Reid of Nevada said very few small business and farm families pay any estate tax. However, Hawaii's high property valuations subject many small businesses to enormous inheritance taxes. That is why Abercrombie and Case support a repeal of most, if not all, estate taxes.

Under President Bush's tax-cut package of 2001, the estate tax is scheduled to decline until it disappears in 2010, but then return to its prior rate of 55 percent of estate values above $675,000. The current rate is 46 percent on estates worth more than $2 million, or $4 million for couples.

Frist now is quietly promising to allow a vote on a compromise bill. Such a measure should be tailored to earn the support of Hawaii's senators and at least one other member in order to win passage.