Washington, April 4 (Bloomberg) -- The House is poised to pass legislationto repeal federal estate and gift taxes over 10 years and replace them with acapital gains tax on the biggest inheritances. It would be the third year in arow the House has approved similar measures with a bipartisan vote. ``It should be about the same as last year,'' said Jennifer Dunn, aWashington Republican representative who sponsored the bill. In September,53 Democrats joined with 221 Republicans in a failed attempt to overridePresident Bill Clinton's veto. The bill is the third installment of President George W. Bush's proposal tocut taxes by $1.6 trillion over 10 years. ``This is a package of irresponsible,excessive tax breaks -- and worse than that, it's a hoax,'' saidRepresentative Fortney Pete Stark, a California Democrat who opposes thebill. To Republicans, the estate tax repeal is a key step in helping businessesthat sometimes have to liquidate to pay estate levies and that applies towealth built from savings on which taxes were already paid. ``We believe this is a form of double taxation that punishes people forworking all of their lives,'' said Oklahoma Representative J.C. Watts, the No.4 Republican in the House. Currently, taxes of 37 percent to 55 percent are due on a dead person'sestate valued at over $675,000. The bill would raise the exemption limit to$1.3 million and phase down the top rate until it reaches 38 percent in 2010.The tax would be fully repealed in 2011, at which point inherited assets worthmore than $1.3 million would be subject capital gains taxes assessed atrates of 18 percent to 20 percent.
`Don't Die'
Democrats offered an alternative to raise the $675,000 exemption to $2million immediately. That would be a better deal for most taxable estatesthan a 10-year wait for repeal, they said. `It's the Republican health plan,'' joked New York Representative CharlesRangel, the senior Democrat on the tax- writing House Ways and MeansCommittee. ``Don't die in the next 10 years if you want to protect your kidsand your estate.'' Democrats said Republicans were hiding the true cost of the repeal to theTreasury by phasing it out slowly. The Joint Committee on Taxation put the10-year cost of the bill at $186 billion. If the tax were repealed immediately, itwould reduce revenue by $662 billion during the same period, Rangel said. After passing the House, the bill goes to the Senate, where it probably willbe merged with the other House bills incorporating Bush's tax proposals. ``What passes today is not likely to be the final answer,'' said RepresentativeNeil Abercrombie, a Hawaii Democrat. Under the House bill, once the estate tax is phased out, capital gains taxeswould be due on assets when they are sold, based on the appreciation sincethe original owner acquired them. Estates under $1.3 million would beexempt, and surviving spouses would get a $4.3 million exemption. The legislation includes rules to ensure that wealthy people don't give moneyaway to relatives and friends to avoid income taxes. The bill would require allnon-cash gifts of more than $25,000 to be reported to the Internal RevenueService.