WASHINGTON - President Clinton vetoed a bill Thursday that would have gradually repealed inheritance taxes, saying it would have benefited the wealthiest Americans while threatening the nation's financial well-being. Republican House leaders vowed a prompt veto override attempt, hoping to keep the so-called ''death tax'' issue alive in the fall campaign.
Clinton, during a ceremony in the White House East Room, acknowledged the estate tax can hit some farmers and small businesses hard, but he said many Democrats favored tax law changes to exempt them without handing the richest 3,000 families an average tax cut of $7 million apiece.
''Our party is not against reasonable estate tax relief. But this bill is wrong. It is wrong on grounds of fairness. It is wrong on grounds of fiscal responsibility,'' the president said.
The White House said the $105 billion cost during the 10-year phaseout would explode to $750 billion in the decade after full repeal, rapidly consuming budget surplus dollars needed to shore up Social Security and Medicare, pay down the national debt and increase spending on education.
The bill, like the marriage penalty tax cut Clinton vetoed a few weeks ago, was part of last year's vetoed $792 billion tax cut that congressional Republicans are now trying to pass bit by bit.
The president said these smaller, more popular bills could ''snowball'' into the same huge tax cut, threatening a return to deficits and higher interest rates for consumers.
''Unless someone stops it, the snowball will turn into an avalanche and you'll have the same impact you had before...,'' the president said. ''This bill suffered the inevitable fate of a snowball in August.''
Only about 2 percent of estates in a given year pay the tax that reaches 55 percent, but sponsors of the repeal won broad support on Capitol Hill by arguing that it inhibits business expansion, threatens breakups of farms and forces millions of taxpayers to pay lawyers, accountants and insurance companies so they can avoid the tax.
''Working men and women across the country recognize that it is simply wrong that after paying taxes your whole life, the government can collect up to 55 percent of these same assets when the head of the family dies,'' said Rep. Jennifer Dunn, R-Wash. ''This is a fairness issue.''
The estate tax veto assures the issue will be part of dozens of House and Senate campaigns and the presidential race between Democrat Al Gore and Republican George W. Bush.
The bill is H.R. 8.
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