Battle on Estate Tax: How Two Well-Organized Lobbies Sprang Into Action

New York Times • June 13, 2002

By Carl Hulse

As the Senate moved toward a risky vote on repealing the estate tax; William H. Gates Jr. sat a continent away on Wednesday, trying to work his will on the proceedings.

One of a group of wealthy Americans who have campaigned to keep the inheritance tax, Mr. Gates, father of the Microsoft mogul, called pivotal senators. From Seattle, he laid out his case for withstanding the Republican-led election year effort to eliminate the tax or put Democrats on record as opposing repeal.

"It is a very legitimate claim of society on an accumulation of wealth which would not have occurred without an orderly market, free education and incredible dollars spent on research," said Mr. Gates, 76.

He said he talked with Senators Jean Carnahan of Missouri and Tim Johnson of South Dakota, two Democrats who will no doubt face tough questions about the tax in their re-election campaigns. Mr. Gates said he doubted that he had much effect. But Mr. Johnson and Mrs. Carnahan were among 44 senators who voted to retain the tax, blocking a business-backed campaign to end it.

When it became clear on Tuesday that the senate was going to vote on repeal, lobbying turned frantic. Groups on both sides blanketed members with e-mail messages, prompting thousands of telephone calls to senators who were viewed as being in the middle of the debate.

Although no senator would acknowledge being swayed by such a campaign, repeal opponents said they believed that they helped cement the votes of at least three law-makers who supported the tax cut package last year that started the fight, Mr. Johnson, Mrs. Carnahan and Senator Dianne Feinstein, Democrat of California.

Repeal advocates say they had successes, as well, in retaining two other Democrats, Ron Wyden of Oregon and Bill Nelson of Florida.

"Oregon and Florida were our biggest targets," said Marty G. Reiser, a spokesman for Citizens for a Sound Economy, an antitax group. "We generated visits to their offices and a lot of phone calls. Their staffs were certainly aware of our pressure."

The fight grew out of a wrinkle in the tax cuts last year. Under current law, the value of assets exempt from the estate tax gradually rises until 2010, when it is eliminated for one year. With no change, the tax then reverts to last year's level. Republicans have said permanently eliminating the tax is a defining issue for their party.

Advocates for repeal included groups like Mr. Reiser's and coalitions that represented some of the biggest business lobbies in town, including the National Federation of Independent Business, the National Association of Manufacturers, automobile dealers, grocery chains, farm groups and even family-held telephone and media companies.

On the other side were aggressive nonprofit groups allied with some of the most successful makers of profit in America, millionaires and billionaires with a deep-seated philosophical resistance to lifting the tax who formed a group called Responsible Wealth. Besides Mr. Gates, the group included Warren Buffett, George Soros and Ted Turner, among other figures as familiar on Wall Street as on Pennsylvania Avenue.

Business lobbyists, who knew from the start that they had a uphill fight, said the maneuver by the Senate majority leader, Tom Daschle, Democrat of South dakota, to bring the issue to the floor unexpectedly on Tuesday cost them.

"Our effort was grass-roots oriented," said Dirk Van dongen, president of the National Association of Wholesaler-Distributors and a leader of the Tax Relief Coalition, which says it has 1,000 members.

The fight was supposed to have been joined on Wednesday, when another group, Americans for a Fair Estate Tax, an alliance of nonprofit groups and others that oppose the repeal, had planned to release the results of a poll that showed that public opinion favored changing tax but not total repeal.

At the same time, the federation of independent business was to begin its annual legislative conference, giving hundreds of small business owners a chance to buttonhole their senators in the Capitol corridors. They expected the vote some time before the end of the month.

Mr. Daschle, running the schedule, had other plans. On Tuesday afternoon, he said that the Senate would start debate a few hours after it had approved a $450 billion increase in the debt limit. He wanted the contrast between the increase in borrowing power and the estimated $740 billion 10-year cost of the repeal to be the backdrop for the floor fight. Stunned, the competing lobbies sprung into action.

On Wednesday, the lobbying rivals went ahead with their planned events. The repeal opponents had a news conference for the release of their poll and a telephone conference with Mr. Gates. Republican had their event, featuring the manager of a Missouri lumber company worried about holding on to the family business, a clear message to Mr.s Carnahan.

A critical development was the ability of Senate Democrats to offer competing proposals to the all-out repeal. Mrs. Carnahan joined Senator Byron L. Dorgan, Democrat of North Dakota, in offering a plan that would have lifted the value of assets exempt from the tax to $4 million as of next year and granted an unlimited exemption to qualifying heirs.

Mr. Gates said he did not intend to leave antirepeal lawmakers on their own. "We are certainly going to be helpful to people who this particularly exposes," he said. "The repeal of this tax gives me nightmares."

Copyright 2002, New York Times