WASHINGTON, DC — The Plumbing-Heating-Cooling Contractors — National Association (PHCC) showed impeccable timing by holding its fifth annual legislative conference on March 29, the day the House Ways & Means Committee approved a bill (H.R. 8) phasing out the federal estate tax by 2011. The PHCC legislative meeting at the Phoenix Park Hotel, whose front door stands a stone’s throw from the Capitol, was dedicated to an update on prospects for ending the estate tax.

The estate tax can run upwards of 55% of the value of the assets over $650,000 (soon to be $1 million) received by one family member from another. The House bill, called the Death Tax Elimination Act, was passed by the full House last week by a 274 to 154 vote.

However, when the Ways & Means Committee passed the bill on March 29, it set up the 10-year phaseout period so that most of the elimination is accomplished in the last few years, instead of being more evenly spread out, as was the case with the bill originally introduced by Rep. Jennifer Dunn (R-Wash.).

Prospects for passage of the Senate version (S. 275), called the Estate Tax Elimination Act, are cloudier. That bill kills the estate tax immediately and replaces it with a capital gains tax that is assessed when an inheritor sells the assets he or she was bequeathed. That Senate bill has some Demo-cratic support. But in a Senate split 50-50 between Democrats and Republicans, any senator can derail a bill by mounting a filibuster, a parliamentary technique used to indefinitely delay a vote on a bill. Numerous Democrats have threatened to filibuster against the Senate bill, sponsored by Sen. Jon Kyl (R-Ariz.).

Framing the Debate

Willie Roberson, chairman of the PHCC legislative committee, set the “semantic” rules for the estate tax debate when he started the meeting by adopting a custom used by his Rotary Club in Buffalo, NY, where he has owned W.C. Roberson Plumbing since 1983. He told the audience of 100 that anyone who said “estate” tax instead of “death” tax would be assessed a $1 fine.

Immediately, he inadvertently referred to the estate tax in his next sentence. He reached into his pocket sheepishly and pulled out a dollar bill. “I was going to use this for a tip to the bellman,” said Roberson, as he handed the bill over to Ike Casey, the new PHCC executive vice president, who was sitting next to the podium.

Many PHCC members in attendance had already brought members of the younger generation into the business and were clearly thinking about the eventual transition. Ken Goedeke, whose father started Paul Goedeke, Inc., in Forest Hill, MD, already has one of his six sons working in the business. Although Goedeke won’t be retiring soon, he did have an experience last year that brought home the estate tax in much more personal detail.

He was diagnosed with diabetes. When his physician gave him the bad news, he happened to be between life insurance policies. “If anything had happened to me, my family would have had to sell my plumbing business to pay the estate taxes,” he said.

What particularly irked contractors like Goedeke was the rhetoric surrounding the estate tax debate. Only a handful of wealthy people pay the estate tax and they can afford it, goes the argument. Elizabeth Paris, tax counsel to the Senate Finance Committee, hammered against that argument.

She said that 104,000 families paid estate taxes in 1999, according to the Wall Street Journal. Only 577 of those families had assets over $20 million. “Would we slaughter 104,000 dolphins to get to 577 tuna?” Paris asked rhetorically.

Despite those numbers, though, a perception still abounds among some Democrats and Republicans on Capitol Hill that elements of the estate tax should be retained. That feeling has been heightened lately by entry into the political debate of an anti-repeal group headlined by investor Warren Buffett and Bill Gates, Sr., father of Microsoft. Multi-millionaire Mark Morgan, the owner of Foster Heating & Air Con-ditioning in Marion, IA, acknowledged that it is easier for Buffett and Gates to shape public opinion than it is for someone like him — or the PHCC.

“An organization like this doesn’t have that kind of influence,” he lamented. “I am just the neighborhood plumbing contractor.”

At the same time, though, Morgan pointed out that repeal of the estate tax does have strong political appeal. He referred to Montana and North Dakota, two states that eliminated their state estate taxes last year by overwhelming votes.

If the Senate follows the House’s lead and votes to repeal the estate tax, it doesn’t look like it will be by a lopsided vote.

Democratic opposition to the Kyl bill in the Senate has led some to assume that Congress may bump up the exemptions rather than eliminate the tax entirely. In addition to the $675,000 unified credit, some inheritors can also claim an additional $1.3 million exemption for closely held businesses. Those numbers could be increased markedly as a middle ground between Democrats, who mostly want to keep the estate tax, and Republicans, who as a rule oppose it. But no PHCC member favored that option.

“If you just whittle down the estate tax, it will grow back just like a cancer,” explained Morgan.

For more information, call PHCC at 800-533-7694 or visit the organization’s website, www.naphcc.org.

Publication date:04/09/2001