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Firms cheer estate tax vote
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July 14, 2000: 2:39 p.m. ET
But Clinton has vowed to veto the bill that would eliminate estate tax by 2010
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NEW YORK (CNNfn) - In a vote cheered by small-business owners and advocates, the U.S. Senate on Friday passed a bill that would phase out the federal estate tax, eliminating it entirely by the year 2010.
"This is a resounding victory for thousands of small-business owners across the country who for decades have fought to liberate themselves from an unfair and punitive tax on their life's work," said Dan Danner, spokesman for the National Federation of Independent Business (NFIB).
NFIB was one of the co-founders of the Family Business Estate Tax Coalition, which has lobbied for the repeal of the tax for years.
President Clinton has promised to veto the bill and there is not enough support in Congress to override a presidential veto. The bill passed in the Senate 59-39, with nine Democrats voting in favor of the repeal.
Even with the threat of a presidential veto looming, small-business advocates were cheered by the bi-partisan support for the bill in both houses of Congress.
"This was a monumental vote for small business," said Jim Hirni, a senate lobbyist for NFIB. "It shows there is a lot of support for this bill. The president should consider that before he goes ahead and vetoes it."
Victory for family owned businesses
Small-business owners and advocates have been pushing for the elimination of the estate tax for years. They argue the tax creates an undue financial  burden for the heirs of family businesses who have to pay huge tax bills when the business is passed down to the next generation.
In many cases, the owners of family businesses have substantial taxable assets, but little cash on hand. In those cases, the heirs often resort to liquidating their assets to pay their estate tax bills.
Small-business owners said the estate tax creates other financial burdens for them in less direct ways. Many family businesses pay thousands of dollars every year in legal, insurance and accounting fees preparing for the inevitable estate tax bill.
Brad Eiffert, who manages his father's Columbia, Mo., lumberyard, pays $36,000 a year for a life insurance policy on his dad, which he hopes will cover most of the estate tax bill he'll receive when he inherits Boone County Lumber. But Eiffert said the $3,000 monthly insurance bill should be spent on capital improvements at the yard, which would give him an edge in competing with national chains such as Home Depot.
Indeed, there has been a steady decline in the number of family owned businesses in the U.S. in recent years. More than 70 percent of all family businesses do not survive through a second generation and 87 percent do not make it to a third generation, according to NFIB.
Don't harm the farm
In the western and southwestern U.S., the bill spawned an unusual alliance between ranchers, farmers and environmentalists, all of whom supported the bill. Forced liquidation of assets triggered by estate tax liability is common among farmers because farms and ranches are among those family businesses that have large, taxable assets.
Steve Moyer, a spokesman for Arlington, Va.-based Trout Unlimited, an environmental group, said the sale of ranch lands in western states, such as Oregon and Montana, have led to greater urbanization and environmental destruction because many former ranch lands have been sold to developers to pay estate tax bills.
A gift to the rich?
Democrats, by and large, opposed eliminating the estate tax, which requires that personal assets worth more than $675,000 be taxed by up to 55 percent when the estate holder dies.
The same bill, introduced by U.S. Rep. Jennifer Dunn (R-Wash.), passed overwhelmingly in the U.S. House of Representatives on June 9. Democrats argued the estate tax bill should be defeated because it would be too expensive and would benefit too few people -- the wealthiest 2 percent of Americans who die each year.
The repeal would be phased in and would cost about $105 billion in tax revenue during the first 10 years. After 2010, the Treasury Department estimates the loss of the estate tax revenue would cost about $70 billion per year.
Democrats offered their own more targeted proposal that would eliminate the estate tax on family owned businesses or farms. But that alternative was voted down on Thursday. 
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