CLINTON VETO SNAGS ESTATE-TAX REPEAL

JOANNA RAMEY

WASHINGTON -- Supporters of repealing the estate tax were dealt a setback last week when President Clinton vetoed the $792 billion Republican tax-cut package.

Contained in the controversial bill, estate-tax legislation may not be entirely dead for this year, although supporters say hopes of outright repeal have faded for the time being. The tax package, which the President vowed to veto from the start, called for phasing out the estate tax by 2009.

Some kind of incremental estate-tax change could resurface, given the broad support for reform on Capitol Hill, said John Motley, senior vice president for government and public affairs at Food Marketing Institute. However, he doesn't expect another call for outright appeal to surface until 2001, after the 2000 election, during which "it will be a campaign issue."

Possible changes to the estate tax could include a reduction of the lowest rate on taxable estates to 18% from the current 37%. The $650,000 estate-tax exemption, which is already set to increase to $1 million by 2006, could also be increased more rapidly.

Tom Wenning, vice president and general counsel of the National Grocers Association, said repeal of the death tax will be an ongoing congressional issue until it passes. "Whenever the window opens, we'll try and get it through," said Wenning, who hasn't given up on seeing it occur by next year.

The Republican leadership has been cautious about describing on what terms they would negotiate another tax bill with the administration, which viewed the $792 billion package as threatening federal programs. Regardless, time is running out before Congress adjourns for this calendar year.

Another provision in the vetoed tax bill of concern to retailers -- - renewal of the Work Opportunity Tax Credit -- - is also likely to resurface by year's end. Senate Majority Leader Trent Lott said a smaller tax package renewing this and other expiring tax credits would likely be voted on before Congress adjourns by the start of November.