Republicans working to cut estate taxes

WASHINGTON – Republicans are scrambling for a new strategy on cutting estate taxes before lawmakers leave for summer campaigning and politicking overtakes policymaking.

The current idea pairs an estate tax cut with popular tax breaks that expired last year. Those breaks include a research and development credit for businesses, and deductions for college tuition and state sales taxes.

House Speaker Dennis Hastert, R-Ill., said Wednesday that the House could vote on such a combination this week.

It is the latest approach that Republicans have tried to steer an estate tax around Democrats. They are reluctant to cooperate in advancing a GOP priority months before an election to determine control of Congress – and possibly the fate of an estate tax reduction.

“There’s a general fear that if Democrats pick up seats in the House or Senate, then at least in the next few years the prospects will get worse, not better,” Michael Graetz, a professor at Yale Law School and co-author of a book about the campaign to repeal the tax.

President Bush’s first tax cut shrank the estate tax through this decade and eliminated it in 2010. That law, however, is temporary and the estate tax reappears at older and higher rates in 2011.

The House last year passed a bill abolishing the tax, extending a yearlong repeal already in place for 2010. The Senate, however, must gather 60 votes in favor of any estate tax change to overcome the obstacles thrown up by Democrats.

GOP efforts to negotiate with Democrats to reduce, but not eliminate, the tax did not bear fruit. The House made a compromise offer that did not attract enough votes to pass the Senate.

Senate GOP leaders decided to add an estate tax cut to a pension and retirement bill that also would revive the popular and expired tax breaks.

Pension negotiators balked, worried that the estate tax could undermine their carefully crafted pension bill.