What's next on the estate tax?

I've been in New Orleans and Mississippi over the last few days, visiting areas of the Gulf hard-hit by the hurricanes (like the devastated ghost town of Pass Christian, Miss.), as well as talking to community leaders about their plans for the one-year anniversary of Katrina. This not only caused me to miss the blogger confab Yearly Kos, but stopped me from blogging about the major victory for working families last week: stopping the repeal of the estate tax.

The estate tax is probably the most important tax debate this year, and as we've said before, a great issue for Southern progressives to speak out on. Despite knowing he didn't have the votes, Sen. Bill Frist's (R-TN) pushed ahead for total repeal anyway, and come up three votes short to get the bill to the Senate floor.

Here's how Ted Boettner of the West Virginia Citizen Action Group sums up the victory from his state's vantage point:

For almost 90 years, America's estate tax has helped build schools, care for the sick, fight crime and fund programs that elevate our standard of living. Repealing the estate tax would have cost $1 trillion over the next 10 years -- exploding the federal deficit (currently $500 billion) and putting government services and charities at risk.

Repealing the estate tax would have benefited multimillionaires at the expense of us all and leave working- and middle-class West Virginians to foot the bill.

The people of Louisiana and Mississippi should feel the same way. The contrast between the rebuilding needs of New Orleans and the hurricane-ravaged coast -- which House leaders say we can't afford -- and the desire of those same lawmakers to give away $1 trillion in breaks to millionaires, couldn't be more striking.

Frist almost got the 60 votes he needed, thanks to six Democrats. Four voted to bring the Frist repeal bill to the floor (Baucus of Montana; Lincoln of Arkansas; Nelson of Florida; and Nelson of Nebraska), and two didn't vote (Rockefeller of West Virginia and Schumer of New York). Two Republicans defected for a "no" vote: Chafee of Rhode Island and Voinovich of Ohio.

So what's next for the estate tax? Frist shunned talk of a compromise, as proposed by Sen. Jon Kyle (R-AZ), that would target small businesses, although the White House is now lining up behind Kyle's measure. Here's what OMB Watch, an excellent group that did much work in making the case for preserving the estate tax, says:

Yesterday's vote was an important victory in a fight that's far from over. The push for full repeal may have finally run out of steam, but opponents of the tax will now turn to "reform" that would be as costly as repeal.

Senator Frist has already indicated he'll revisit the issue. Senator Jon Kyl (R-AZ) his party's point person on "reform" options, without giving any details, assured his colleagues that they are "going to get something on the estate tax."

Senators must continue to stand with the American people, their values and priorities, and refuse unfair and unreasonable compromise proposals.

Read more of OMB Watch's analysis and follow future developments here.