The U.S. Senate has voted to repeal the estate tax over a 10-year period, but the 59-39 margin is not enough to override the promised Presidential veto. Nine Democrats voted in favor of the bill, while four Republicans voted against it. President Clinton called the measure "a budget-busting bill that provides a huge tax cut for the most well off Americans at the expense of working families."

The White House said the repeal would cost $105 billion during the phase-out period and $750 billion over the next decade. A Democratic substitute for the bill, which would have cost $64 billion over 10 years, was defeated.

Supporters of the repeal say the estate tax requires costly planning and forces many small businesses and family farms to be sold-off, thus punishing success. "No family, no farm and no business should have to worry about this sort of thing," said Sen. William Roth (R-DE).

As a replacement for the present estate tax system, the bill would repeal the step-up in basis for appreciated assets transferred at death. The resulting carry-over basis would increase capital gains taxes on inherited appreciated assets when they are sold. Some experts argue that such a system will be even more complex than transfer taxation.

In any case, the Senate will not likely override the President’s veto. But the passage of this bill and the support of some Democrats indicates that future action on estate taxes may be inevitable.