By Amanda Becker
WASHINGTON, Sept 19 (Reuters) - The Trump administration may abandon its promise to repeal the U.S. estate tax on inherited assets in an effort to make a still-evolving Republican tax cut framework more politically feasible, according to sources familiar with the deliberations.
A so-called Big Six team of Republican tax package negotiators, including senior lawmakers and top Trump advisers, has been tight-lipped about the details that will be part of their plan, expected to be unveiled next week.
Republicans have long criticized the estate tax, saying it taxes hard-earned income a second time and hurts family-owned businesses and farms. Democrats say repealing it would be a windfall for only the wealthiest of taxpayers.
After months of debate about how to make good on a 2016 campaign promise to overhaul the tax code, Republican tax negotiators are in a bind. They have largely given up on a comprehensive revamp of the code and are now focused on a package of tax cuts for individuals and businesses.
To offset the revenue losses that would result from such cuts, they need new revenues and need to hold onto existing revenues to avoid expanding the federal deficit too much.
To that end, Trump administration officials have considered keeping the revenue-raising estate tax, which is levied on estate assets worth more than $5.49 million, or $10.98 million for married couples, according to those familiar with the talks, but not authorized to speak about them.
"There have been high-level discussions in the White House about giving up on repealing the estate tax," said a congressional aide.
The 40 percent estate tax currently affects just 0.2 percent of estates, or approximately 5,460 estates this year, according to the nonpartisan Tax Policy Institute, a think tank.
But the tax will raise between $25 billion and $34 billion over the next decade, the Congressional Budget Office has estimated.
A White House spokeswoman declined to comment on "rumors about internal deliberations," but said President Donald Trump "has made it clear that his priority is ensuring American workers get a pay raise" by making the tax code more competitive.
In a recent meeting between Trump, Senate Democratic leader Chuck Schumer and House Democratic leader Nancy Pelosi, the president sought to make the case that his tax plan would not favor the rich. The Democrats pointed to the estate tax repeal, which was then included in the president’s plan, as one benefit for the wealthy, those familiar with the meeting said.
Though analysts had expected an estate tax repeal to take a back seat in the Republican tax push to other priorities, they cautioned that if the White House decides to abandon it, the plan would meet resistance from Trump's own party in Congress.
The Big Six team consists of Treasury Secretary Steven Mnuchin, the National Economic Council's Gary Cohn, Senate Republican leader Mitch McConnell, House Speaker Paul Ryan, and Senator Orrin Hatch and Representative Kevin Brady, who head the tax committees in their respective chambers.
Abandoning estate tax repeal would please many Democrats, but make it more difficult to push the tax package through the House of Representatives, where conservative Republicans are already wary of the hush-hush negotiations.
“I do think reform will include, if not outright repeal, then a substantial relaxation and modification of the estate tax rules," Deloitte’s Jonathan Traub told Reuters.
Republicans could tweak the estate tax by creating a higher exemption amount, lowering the rate, or a combination thereof. Or they could pursue a temporary repeal to preserve revenue without endangering the package's prospects, said analysts and a former committee staffer now in the private sector.
"There is this menu of items they want to pay for, the estate tax being one of them," said Cowen & Co's Chris Krueger, a Washington analyst. "It's the candy, not the broccoli." (Additional reporting by David Morgan; Editing by Kevin Drawbaugh and Tom Brown)
