In his speech (text; video) to the NAACP last month, President Bush implied that the estate tax discriminates against black entrepreneurs.

Darius Ross, himself a black entrepreneur, shredded that absurd, if not vaguely racist, hypothesis in an incisive TomPaine.com commentary last week.

Ross cites a stat suggesting that the estate tax may actually be roughly ten times more burdensome on whites: “The median net worth of African American households was $19,024, compared to $120,989 for whites in 2001,” he writes.

Pryor said his plan would increase the exemption to $5 million and set the tax rate at 35 percent.

"It really takes care of the small business family farm problem we have in the state," Pryor said about his plan. "It doesn't completely fix up everybody, but it makes it so much better for virtually everybody."

He said less than 3 percent of taxpayers actually pay the estate tax.

"We're not talking about the 97, 98 percent who don't pay it," he said. "We're trying to fix it for people in small towns who own a car dealership, own a convenience store (or) have a farm."

Sen. Chuck Grassley (R-IA) may try to make an estate-tax compromise the first order of business when the Senate returns from recess, according to WebCPA:

Spokespeople for Senate Finance Committee Chairman Chuck Grassley, R-Iowa, are already saying that his take on an estate tax reform bill could be next on Congress's docket.

A Republican-led effort resulted in the bill's second defeat on the Senate floor last week, but any legislation brought by Grassley would likely be a compromise crafted within the Finance Committee and aimed at winning the support of Democrats.

From the San Francisco Bay Guardian, a great article that connects the dots between the IRS's plans to downsize its estate tax division and the mania in Congress. It's definitely worth checking out, especially if you're new to the estate tax debate.

Here's one interesting (but purely speculative) point from the article:

Estate planner Schiller likened opponents of the estate tax to medieval villagers who complained of gout to prove how well nourished they were.

"People want to believe they have an estate-tax problem," he said, "so they can feel successful."

Not only has the reduction in the estate tax made the federal tax regime less progressive, it could make state tax policies less progressive as well.

Andrea Coombs writes in the Wall Street Journal:

Because of a federal law that has been phasing in over the past few years, the states' share of federal estate-tax revenue has fallen to zero, from 16% in 2001...Budget-challenged states are feeling the pinch. And a number of states have responded with some form of estate or inheritance levies of their own.

Although Coombs focuses on the problems of estate planning vis-à-vis new and changing state estate tax laws, I see another problem. States could implement (and some have) their own estate taxes to make up for the shortfall. But there's a catch. States hoping to avoid an exodus of retirees who want to avoid paying an estate tax must now compete with each other. Essentially, this eliminates the estate tax in most states, and thus deprives them of an important income stream, forcing them to increase regressive taxes such as sales and property taxes.

Still going.

Washington Wire notes that Sen. Chuck Grassley (R-IA) "would like to craft an estate tax compromise in the Finance Committee that can win the support of Democrats."

Ugh. National Journal's CongressDaily (subscription required) reports today that anti-estate tax coalitions are regrouping for a massive grassroots push during Congress's August recess. An unnamed source identified about a dozen Democrats who the coalition may target, including:

• Sens. Daniel Akaka and Daniel Inoye of Hawaii
• Sens. Maria cantwell and Patty Murray of Washington
• Sen. Mark Pryor of Arkansas
• Sen. Max Baucus of Montana
• Sen. Debbie Stabenow of Michigan
• Sen. Robert Byrd of West Virginia
• Sen. Tim Johnson of South Dakota
• Sen. Ken Salazar of Colorado

Oddly, the list includes two Senators who favor the "trifecta" bill -Byrd and Baucus- and neither of the two Republicans who oppose it.

The business coalitions may use several strategies.

Business lobbyists are mulling an effort to change a provision in the legislation that could nullify state laws that exclude tips from the calculation of whether employers are paying the minimum wage. Lobbyists are specifically hoping to mollify Cantwell, whose state has such a law. She mentioned the issue in her statement opposing the trifecta legislation, saying "it cuts salaries for Washington state's minimum wage tip workers." The hope is that if Cantwell switches, Murray and other senators might follow suit. Business sources talked about changing the provision and running the legislation through the House again, or seeking a commitment from Frist, House Speaker Hastert and President Bush to change the measure down the road.

As Sen. Frist made clear, the fight over the estate tax is far from over. Keep visiting the BudgetBlog for more information.

Congress Daily: Biz Groups Planning August Grassroots Effort On Taxes

House Democrats are challenging a recent move by the IRS to downsize its estate tax auditing department (More here and here). Rep. John Olver (D-MA) just threw his hat into the ring, too. From BNA (subscription required):

Olver expressed "strong concern" despite IRS's assertions that the change is due to the declining number of returns as a result of a bigger exemption.

The Massachusetts Democrat pointed out that estates of more than $2 million are still subject to the tax.

"I am greatly concerned that this sudden and substantial personnel reduction will cripple the ability of the IRS to detect tax cheating among the wealthiest estates," Colvert said in an Aug. 1 letter to Commissioner of Internal Revenue Mark Everson.

IRS has taken significant heat from Congress since it announced July 24 that it intends to offer voluntary retirements to 157 of the 343 existing estate tax attorneys who audit estate and gift tax returns.

Olver asked Everson to delay the personnel reductions "until it can be definitively shown that the IRS will enhance and not weaken its current efforts" in the estate tax area." In fact, he said, "I believe that the IRS should increase, not decrease, its audit coverage in this area."

On July 28, 25 other House Democrats sent a letter to IRS Commissioner Mark Everson questioning the decision. From BNA again:

Reps. John Lewis (D-Ga.), ranking member of the Oversight Subcommittee, and Earl Pomeroy (D-N.D.), a senior panel member, said they fear IRS may not be devoting adequate resources to compliance in this area.

Taking a more urgent tone, 23 House Democrats said in another letter to Everson that IRS should rethink the decision at once.

"We have serious concerns about this significant shift in tax collection policy and request that you immediately delay this decision until Congress has adequate time to review your plan," said the lawmakers, led by Rep. Steven Rothman (D-N.J.) and including Ways and Means member Rep. Benjamin Cardin (D-Md.).....

"We cannot understand why you would want to eliminate auditors from a division that is not only the most productive, but also, according to your agency, where there is a growing need for audits," the Rothman group said.

BNA: Olver Criticizes IRS Decision to Reduce Attorneys Working on Estate Tax Audits

BNA: Decision to Reduce Estate Tax Auditors Not Political, Everson Insists at Hearing

The defeat of the "trifecta" last night bodes well for those opposed to gutting the estate tax. This threat to the long-term fiscal health of the nation, has been staved off - for now. Senate Majority Leader Bill Frist (R-TN) voted "Nay" on cloture to reserve to the right to reconsider this bill in September. While passage of an estate tax cut remains highly in doubt, there is a non-zero chance that this zombie legislation will be resurrected by Frist.

I thought it would be interesting take a look at what some of the reactions from yesterday's vote to perhaps have a glimpse the future - especially from those Senator's targeted by the bill's, umm, inducements:

Sen. Mark Pryor (D-AR): "I cannot ignore our $300 billion deficit, and the ongoing costs to support the wars in Iraq and Afghanistan and reconstruction in the Gulf Coast."

Sen. Daniel Akaka (D-HI)(BNA sub. req'd): "I am talking about opposing cloture on a bill that would mortgage future generations by adding more than $300 billion to already alarming federal deficits."

Sen. George Voinovich (R-OH): "Repealing the estate tax, which would cost $267 billion from 2007 to 2016, would be incredibly irresponsible when we must fund the war, secure the homeland and when we know the tidal wave of entitlements are coming due. The numbers just don’t add up."

I would say that the "vulnerable" Senators who Frist thought he could persuade to pile on more debt, have thought better of this irresponsible tax scheme, and it's hard to imagine that Pryor, Akaka, or Voinovich would change his mind and decide that $750 billon of revenue loss is somehow conducive to fiscal sanity.

A coalition of fiscally responsible Senators stood up last night against the budget-shredding Estate Tax Caucus. By a vote of 56-42, a motion to proceed to consideration of the "trifecta" bill failed.

And thanks to everyone who contacted their Senators and urged them to vote against this horrendous bill!

In advance of the vote on the "trifecta" estate tax bill in the Senate, which rumors say could be as early as tonight, OMB Watch sent a letter in strong opposition to the bill to the full Senate.

Stay tuned for more updates as they become available.

Sen. Maria Cantwell (D-WA) - a key swing vote on the upcoming "trifecta" bill - has publicly announced she will vote against the bill. Cantwell's bold decision to stand up for working-class families in Washington and around the country who would get a bad break with this legislation is a significant blow to Sen. Frist's (T-RN) attempts to pass this crass and manipulative bill.

Sen. Cantwell should be praised for her brave leadership in speaking out against this effort. Kudos to her!

Sen. Christopher Dodd (D-CT) has written a letter IRS Commissioner Everson to perform a cost-benefit analysis of estate tax auditors. Following up on a story in The New York Times, Dodd is concerned that plans to cut estate tax auditors - a group that is considered the most productive at the IRS in terms of revenue collected per hour of work - was politically motivated. He is requesting from Everson a "detailed justification of the job cuts" and a "quantitative description of the impact the proposed cuts will have on enforcement."

According to Dodd's press release, "The National Taxpayer Advocate has estimated that as much as $250-$350 billion per year in taxes that are legally owed goes uncollected, an amount that translates to an extra $2,000 that the average taxpayer must pay every year in order to cover the tax avoidance of others."

BNA (subscription required) has the full text of Dodd's letter.

Fantastic op-ed article from William Spriggs, chairman of the economics department at Howard University and former executive director at the National Urban League, on the chutzpah President Bush displayed urging help in repealing the estate tax in front of the NAACP. Spriggs finds Bush's tactics insulting, and pulls no punches in suggesting so:

There's a sense of pandering in his tactic of identifying a prominent black, Robert L. Johnson, who is wealthy and who supports repealing the estate tax, and then pretending that the group of intelligent, educated blacks in the room before him doesn't know about the budget choices repealing the estate tax would entail. It is disturbing, to say the least...

...It's too easy to mention Robert Johnson and then not have to mention the facts of wealth inequality or the budgetary impacts of estate tax repeal.

It is a disturbing disconnect that the president would talk about the difficulty his party has in reaching blacks — and then give an economic example that benefits no blacks, at the cost of great benefit to programs that serve blacks well.

The full article is worth a read

Sacramento Bee: Bush, Blacks, and the Estate Tax

Adam wondered last week why Senate Majority Leader Bill Frist (R-TN) is so fanatical about passing an estate tax cut. I have to admit: I, too, am intrigued as to why after a couple of failed attempts to get that dastardly thing passed Frist keeps banging his head against the wall. This AP story, however, only intensifies the mystery. Why slash the estate tax when you can get around it by "donating" it to yourself?

Frist and his wife are the sole trustees in charge of a family foundation bearing the senator's name, according to Internal Revenue Service forms.

[The] foundation had more than $2 million in assets in 2004, the last year for which a tax form was available.

Frist...set up the organization about 12 years ago. It did not have much money until 2001 when Frist inherited HCA Inc. stock from his mother.

Janne Gallagher, vice president and general counsel at the Washington-based Council on Foundations, said assets that go directly from an estate into a private family foundation, as in this case, are generally not taxed, unlike money distributed directly to heirs. She said once in the foundation, the money is largely tax exempt.

His foundation did not make charitable contributions in 2004 or 2003. However, but that was allowed under IRS payout rules that generally require annual donations because the foundation in 2002 made a large contribution of roughly $877,000.

That went to the Montgomery Bell Academy, a private boys' school in Nashville that Frist attended.

Associated Press: Frist fails to disclose foundation role