The Senate is now debating the permanent repeal of the estate tax. Here is what Gene Sperling, Clinton's economic advisor, had to say about this at TPM cafe:
http://www.tpmcafe.com/node/305211. All Compromises Go Only To Those Over $7 Million: Imagine you heard that the United States Senate was going to enter a major debate with the following limitation: the tax cut must cost hundreds of billions of dollars over the next decade and it must be limited entirely to couples with estates worth over $7 million. That is the debate that will take place today, plain and simple. You will hear many different variations of rates and exemptions but remember this: one could likely get agreement from a broad group of Democrats for an estate tax worth $7 million per couple – which is where the law will be in 2009, with a 45% rate above that amount. Therefore, every – and I mean every – so-called compromise, whether it is from Republicans or Democrats, that will be debated this week will be about how whether to spend an additional $400-$500 between 2012-2021 on estates solely above $7 million per couple– or just as some so-called compromises suggest, only provide them $200-$300 billion additional tax relief. Just a reminder: 99.7% of estates will not pay a penny of federal estate tax in 2009. All of this extra money goes to the wealthiest 3 of 1000 estates.
2. Double Your Money: The Estate Tax is Twice as Generous as it Appears. For those who thought the estate tax exemption was $2 million in 2006 and $3.5 million in 2009 – not $7 million let me explain. Estate taxes are about the only income level in taxation that is always described in per person terms, as opposed to per family terms. Right now, a married couple can leave $4 million tax free to their heirs and in 2009 it will be $7 million. If a few people are falling through the cracks here, than lets do a sensible reform that says every couple can automatically leave double the personal amount automatically without any tax planning.
3. Real Compromises and Fake Compromises: It’s the Rate Stupid.
After Katrina, even the most ardent estate tax repeal advocates decided it was unseemly to push for complete repeal. Thus one started to hear so called compromises, particularly from Senator Jon Kyl of Arizona, that simply raised the exemption level to $5 million per person (remember that is $10 million per couple) and applied a 15% rate to estate value over that. Another so-called compromise seeks to have a 15% rate for estates between $7-$10 million per couple; 25% for estates between $10-$20 million, and a 35% rate for even the very richest estates above this $20 million threshold. Funny thing though: According to the Joint Tax Committee, the Kyl “compromise” will cost 84% as much, and according to Tax Policy Center, the graduated rate” compromises” would cost 74% as much.
These so-called compromises show -- to paraphrase James Carville -- that when it comes to the estate tax, it is the rate stupid. While those arguing against the estate tax point to the 45% rate above the $7 million exemption level in 2009 – they fail to mention that the effective rate – the share of the estate that will actually be paid in taxes – is only 17%, less than most workers will pay in federal income and payroll taxes. When you lower the statutory estate tax rate to 15% the Tax Policy Center estimates that the effective rate will fall to only 6%.
4. Why Is This Tax Cut Different From All Other Tax Cuts?
Let’s see. The nation is at war and troops have been having trouble getting the safest equipment. Child poverty has been on the rise for four straight years. Deficits are projected to total $4 trillion in the next ten years, our entitlement challenge is unresolved, working wages have been stagnating or declining, and fixing the estate tax for the top 3 of every 1000 estates in 2011 is what we should rush to the floor of the Senate in the summer of 2006?
But even if you are only moved by tax cuts, someone ought to remind the Senate leadership that all of the middle class tax cuts expire after 2010 too. Why in the world then should the United Senates decide that only the most expensive, regressive tax cut perhaps ever proposed is the sole one that must be rushed to the floor? Any Senator looking for a reason to vote no on the motion to proceed should not have to look much further than that. Also note that you will not hear a word this week from supporters about how to pay for this tax cut so that it does not increase the deficit. Even a supporter of repeal – who also believes in pay-as-you go principles – could easily decide that if we are going to spend an additional $400 billion in tax cuts for estates worth over $7 million – we should only do so if we can find offsets so that we are not passing on the debt and interest payments to the 99.7% of Americans – including our children and grandchildren -- who will not benefit one penny from these proposals.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
