While a total elimination of the Estate Tax appears dead for 2006, the House of Representatives passed and sent to the Senate a compromise measure in late June that would cut taxes on inherited estates.

The bill would reduce estate taxes in 2010, the one year that they had been repealed under President Bush's first tax cut. In 2010, under the legislation passed by the House, estates worth up to $5 million for an individual and $10 million for couples would be exempt from taxation. The bill would then cut the estate tax in years after.

The $5 million and $10 million exemptions would be automatically increased each year to keep pace with inflation. After the exemptions, estates worth up to $25 million would be taxed at rates equal to those on capital gains, which is currently at 15 percent.

The remainder of any larger estates would be taxed at rates twice that of capital gains, or 30 percent at first and 40 percent when the scheduled capital gains tax increase takes effect.

The Senate vote is expected to be close. Earlier in June, the Senate fell three votes short of the 60 votes needed to end a filibuster on the estate tax.

With an eye on the elections scheduled for later this year, the House measure included a special tax cut on timber gains that observers suggest was added in the hopes of swaying some Northwestern Democrats, who represent states with lumber and timber industries.

One such Democrat, Sen. Ron Wyden of Oregon, still seemed to be opposed to the estate tax measure.

"The senator continues to look for ways to pass sensible estate tax reform, but he won't support a proposal that pushes the national debt to new record highs," Josh Kardon, the senator's chief of staff, told the Washington Post.

Jade West, senior vice president for government relations at the National Assn. of Wholesaler-Distributors, said that she and NAW had been hoping for a complete elimination of the estate tax.

Before the early June Senate vote, there had not even been a Senate vote on the issue since 2001. A Senate vote had been scheduled for last September, but it was set aside after Hurricane Katrina required the Senate to shift its attention to relief efforts in the Gulf Coast.

Since there hadn't been a repeal vote on this in the Senate for five years, lobbyists did not have a reliable scorecard of who supports what. After the June vote, observers at least had an idea of, "which senators are reluctant to vote for appeal, which ones will support a compromise," West said.

Under the current law, which was part of President Bush's tax cut package of 2001, the estate tax rate has been declining annually and will eventually disappear altogether in 2010 — but then resume in 2011 at its original rate of 55 percent.

The exemption level on the estate tax has risen annually since 2001. As a result, the number of estates subject to the tax has fallen steadily—from a little more than 2 percent of all estates in 2000, to one-half a percent this year. By 2009, it is projected to fall to 0.3 percent. The top tax rate has been on the decline: from 55 percent in 2000 to 46 percent today.

Republicans in Congress have fought for years to eliminate the estate tax, contending it is unfair to tax businesses left to the next generation.

"Americans are being taxed almost every moment of their lives. My goodness, when they are dead, do we have to tax them again?" said House Majority Leader John Boehner, an Ohio Republican.

Opponents of repeal stress that the revenue lost by its elimination would have to be made up elsewhere—ostensibly in raised taxes. The actual amount of revenue collected by the estate tax varies widely, however.

Opponents also argue that only a small percentage of businesses are actually impacted by that tax. Very few businesses will be forced to sell their business assets to pay the tax, they cite.

"The small business response is, 'It doesn't matter how few,'" West responded. "There is a belief that taxing somebody when they die is just fundamentally and inherently unfair. Your ability to pass on your business to your kids should not be jeopardized by a 'death tax.'"