Senate Majority Leader Bill Frist has "postponed action" on estate tax "compromise" legislation introduced by House Ways and Means Chairman Bill Thomas (R-CA) on June 19 and approved by the House of Representatives on June 22, apparently because he is unsure if there will be sufficient votes to pass the bill. He says he does intend to bring up the issue again sometime this summer. This fool’s compromise proposes to exempt $10 million per married couple or $5 per individual, tax estate amounts between $10 and $50 million at the capital gains rate (currently 15%), and tax amounts above $50 million at twice that (currently 30%).
The Joint Committee on Taxation estimates that Thomas’s estate tax proposal will cost the federal government $602 billion, plus an extra $160 billion when interest is accounted for. This adds up to 75% of the expense of a full repeal, which makes it an even more costly compromise than those offered up by Senator Jon Kyl (R-AZ) or Senator Max Baucus (D-MT).
Only 0.5% of the richest families in America currently pay estate taxes. Moreover, under current law in 2009, only three out of every 1,000 estates will pay a penny in estate taxes — all couples with estates up to $7 million (99.7%) will pass on their entire estates tax-free. Any compromise proposal which deviates from 2009 current law — such as Thomas’ bill and Kyl’s older proposal — is therefore crafted entirely to benefit this tiny sliver of the richest estates.
American voters stand strongly against drastic estate tax legislation. According to recent polling data, nearly 60% of voters hold the initial, unaided view that estate tax should be left as is or reformed, and only 23% support repeal. When asked about the estate tax in the context of other budget priorities, voters rank repealing the estate tax as the last priority, and 55% of voters oppose repeal.
Thomas’s compromise, nearly as regressive and costly as a full repeal, is no compromise at all. Passing even this compromise legislation would constitute one of the most regressive tax cuts in the history of the United States. Middle- and lower-class Americans will be forced to shoulder the burden of radically decreasing the estate tax — both monetarily and through decreased public programs. In order to cover the monetary gap, the government will plunge further into debt, which will limit its ability to address the Social Security solvency gap and reduce the money available for public programs. It will also have to tap other tax sources, like payroll taxes, which will overwhelmingly hinder lower-income families.
As the Senate continues to consider the estate tax, we urge them to uphold the core American values of fairness and belief in meritocracy by ignoring the deceptive 10-year lobbying efforts for legislation that will help only the wealthiest at the expense of the rest of the nation. The majority of Americans understand the importance of this issue, as a recent poll by Penn, Schoen & Berland Associates makes clear.
The Center for American Progress has been out front and outspoken on this issue. Learn why the repeal or any reduction of the estate tax is bad for America.
- Bush Values Seen in Estate Tax, Preschool Plans (Bloomberg)
- Estate’s Rites
- Repeal/Reform of the Estate Tax
- Burdens of Wealth
- The Case For Sensible Estate Tax Reform (NPR)
- Massive Estate Tax Cut Unseemly In Any Season (Bloomberg)
- The Estate of Misguided Choices (TPM Café)