Republicans say they will pursue a compromise on reducing the 'unfair burden' on small businesses.
Republicans and small-business groups vowed to keep fighting against the estate tax, after their efforts to repeal it were blocked in the Senate on Thursday.
Largely along party lines, the Senate voted 57-41 to end formal debate on a bill to repeal the federal estate tax -- dubbed the "death tax" by critics -- falling three votes short of the supermajority required to proceed. Two senators abstained.
In floor statements on Wednesday, Senate Republicans had acknowledged they lacked the votes to avoid an expected filibuster on the bill, which was supported by President Bush.
Senate Majority Leader Bill Frist (R-Tenn.) called the results unfortunate, saying the tax is an "unfair burden" on America's small businesses.
"This won't be the last time this year the Senate votes on this important issue -- be it on the floor or in some other form," First said in a statement. "Getting rid of the death tax is just too important an issue to give up so easily."
Sen. Jon Kyl (R-Ariz.), who had floated a compromise proposal that would retain the tax with estates valued above $5 million taxed at 15% and those over $30 million taxed at 30%, pledged to meet with Senate leaders immediately after the vote to "explore other avenues of bringing permanent relief of the death tax," a statement from his office said.
Small business groups, who have long opposed the tax, also expressed frustration with the failed bid.
"Today, the Senate had a real opportunity to do what a bipartisan majority of senators have repeatedly said they wanted to do -- end the unfair, family-business destroying, double taxation of the death tax," Dan Danner, executive vice president of the National Federation of Independent Business, a Washington lobby with more than 600,000 members nationwide, said in a statement.
The NFIB has been an outspoken critic of the tax, which it says forces small-business owners to pay thousands of dollars more in legal fees for estate planning, among other expenses.
"The death tax discourages savings and investment, reduces wages and job creation, and is the leading cause of dissolution for thousands of family-run businesses," Danner said.
Opponents of repealing the tax say the it affects less than two percent of the nation's wealthiest estates, while providing critical revenue at a time of high federal deficits, growing Social Security costs, and continuing military operations in Iraq and Afghanistan. They estimate that a repeal would as much as $1 trillion in federal revenue within the first decade.
Under President Bush's 2001 tax cuts, the estate tax is currently being phased out by 2010, but returns in 2011 with its original exemption level of $1 million and a top tax rate of 55%.