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Friday, March 25, 2005
Support for Estate Tax Shaky in Congress
Although no timetable is set for legislation yet, proponents of estate tax repeal will push this year to gather the 60 votes necessary to clear a measure repealing the tax. This is projected to happen despite widespread concerns about an exploding budget deficit; record-low levels of national revenue; very high potential future costs of Medicare liabilities, Social Security reform, and Alternative Minimum Tax reform; as well as the fact that Congress and the President are looking to further cut taxes.
The House has more than enough votes to pass a permanent repeal measure, while the real fight would take place in the Senate to get a supermajority that would back repeal legislation.
A new book on estate tax repeal is out, titled Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth. Written by Michael Graetz and Ian Shapiro, the book seeks to answer how the estate tax, which has been around since 1916 and is paid by less than the wealthiest two percent of Americans, was voted in 2001 to be phased out through 2010 with broad bipartisan support and almost no coordinated opposition.
The authors of the book, as well as other supporters of the estate tax, believe that estate tax repeal is not only morally irresponsible (because the tax is extremely progressive) but also economically irresponsible. Len Burman, who is authoring a new report, "Options to Reform the Estate Tax," has noted that permanent repeal would result in both a static annual cost of about $50 billion in revenue, as well as a drop in charitable contributions of about $17 billion annually. He also notes in a recent Tax Policy Center Issue Brief that raising the exemption to $3.5 million would cut the number of farms and businesses liable for the tax by 75 percent, to just over 100, with only about 10 small businesses affected. Given our current deficits, Congress would be wise to consider reform options to the estate tax, as opposed to permanent repeal. When Burman's paper outlining reform options becomes available, it will be posted here.
Posted by Becky Lewis
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