A Resounding "No" to Estate Tax Repeal

On June 12, the Senate rejected a proposal by Sen. Phil Gramm (R-TX) to make repeal of the estate tax, which under current law only expires for only one year, in 2010, permanent. Repeal advocates needed 60 votes to send the House-passed estate tax repeal bill on to the President for his signature, but only received 54 votes -- 44 Senators, including 2 Republicans, voted against repeal. This is even fewer votes than repeal proponents received in February on a non-binding .

On June 12, the Senate rejected a proposal by Sen. Phil Gramm (R-TX) to make repeal of the estate tax, which under current law only expires for only one year, in 2010, permanent. Repeal advocates needed 60 votes to send the House-passed estate tax repeal bill on to the President for his signature, but only received 54 votes -- 44 Senators, including 2 Republicans, voted against repeal. This is even fewer votes than repeal proponents received in February on a non-binding .

The Senate also voted on, but did not pass, two Democratic reform alternatives, which would have preserved the estate tax but introduced other changes to exempt even more than the 98% of Americans who do not currently have any estate tax liability. One proposal, by Sen. Kent Conrad (D-ND) which received 38 votes [1], would have accelerated the higher exemption rates which were signed into law as part of last year’s $1.35 trillion tax cut – immediately raising them to $3.0 million ($6.0 million for couples) through 2009 and $3.5 million ($7.0 million for couples) thereafter. The other, offered by Sen. Byron Dorgan (D-ND), would have exempted all qualified family owned businesses and farms from any estate tax liability and kept in place current exemptions that are scheduled to rise to $3.5 million for an individual in 2009, and received 44 votes [2].

With the many pressing concerns facing us -- strengthening our emergency response systems, educating and investing in our children, ensuring that the Social Security system remains strong for future generations, providing an affordable prescription drug plan for the country’s seniors, and finding real ways to ensure that people have the education, job training and support they need to care for themselves and their families -- the Senate was correct to recognize that there are no leftover resources to provide tax breaks to the wealthiest 0.5% of estates. (Congress' Joint Committee on Taxation had estimated that permanent repeal of the estate tax would cost $100 billion in the decade ending in 2012 -- $56 billion in 2012 alone -- and other estimates show that repeal would cost the country more than $740 billion in the second decade of repeal.)

American Public Supports Reform -- Not Repeal
The Senate, however, was not only facing a lack of resources as it considered permanent estate tax repeal, but also a lack of interest among the American public for this costly and unfair tax cut. Polls conducted over the last 4 years show that tax cuts consistently rank at or very near the bottom of Americans’ priorities, with issues such as ensuring Social Security’s strength, providing a prescription drug benefit for seniors, and education remaining at the top of their lists. Moreover, the estate tax comes in last when compared with all the other tax cuts that are already a low priority.

A poll conducted in May by Greenberg Quinlan Rosner Research for OMB Watch and Americans for a Fair Estate Tax [3], shows that when voters are given a choice between repealing or reforming the estate tax, 58% support keeping it, with some reforms, especially those that would provide more protection for small farms and businesses. When they learn more about the estate tax and who it affects, their support grows to a margin of 2 to 1. In other words, when scare tactics are dispensed with and the facts are made known, 67% of those surveyed support reform of the estate tax.

Estate Tax Polling Results Get more background information and data from this poll. [3] Federal Budget Priorities "When thinking about the federal budget, which TWO of the following would you personally give the highest priority to?" Repeal Message Some people say we should eliminate the estate tax because it's nothing but a death tax that punishes those who succeed, especially small business owners and farmers. First, they spend their lives paying taxes on their hard earned money. Then, when they die, the government turns around and taxes it again. Children are often forced to sell the business or farm just to pay the taxes. We can't rob parents of the ability to provide security for their children. Reform Message Some people say eliminating the estate tax is a gift to multi-millionaires at the expense of 99 percent of American taxpayers. Giving them a new tax break would sacrifice our commitments to strengthen Medicare and Social Security, improve education, and fight terrorism. Instead, we should reform the estate tax to protect small businesses and family farms. That's the best way to advance the priorities that benefit all Americans. Reform vs. Repeal Do you favor eliminating the estate tax or simply reforming it to protect small businesses and family farms? Do you strongly favor (eliminating/reforming) it or somewhat favor (eliminating/reforming) it?"

Speaking at a press briefing to release the results of the poll, Conrad [4] illustrated both the massive costs of repeal and the inherent unfairness of spending hundreds of billions of dollars to offer a tax break to the wealthiest of the wealthy by noting that, "Mr. Skilling, the former CEO of Enron, would benefit to the tune of $55 million if the estate tax is repealed,” and that represents all of the Social Security taxes of “30,000 Americans earning $30,000 per year." Bill Gates, Sr, himself one of these wealthiest of the wealthy and an outspoken opponent of estate tax repeal, succinctly summarized the many strikes against repeal, saying [5], "Congress should reject the notion of wholesale repeal in the short term because it is fiscally reckless, and in the long term because we recognize the importance of protecting our democracy from a further buildup of hereditary wealth."

What’s Next?
Even with the lack of support for repeal among voters, the objections of many who actually pay the estate tax, and the lack of resources to pay for a tax cut for a few thousand estates, repeal advocates will nevertheless continue in their efforts to make repeal permanent. Shortly after the vote, Gramm said he would bring the issue up again after October 1, when the rules that require 60 votes (called a "supermajority") to pass such proposals expire and revert back to a "simple majority" of just 51 votes. (For more on Senate efforts to reinstate these rules to preserve this key feature of the deliberative quality of the Senate, see this related article [6]). Proponents of repeal have already launched a round of attack ads in Missouri, South Dakota, and Minnesota. For more on these ads and their use of innuendo and erroneous information, see this OMB Watch article [7].

Though neither reform alternative secured enough votes to pass, it was clear that Senate Democrats (and some Republicans) are now calling for responsible, reasonable, fair reform -- not repeal -- of the estate tax. With last week’s vote policymakers can now turn to the important process of investigating just what that reform measure looks like.

See www.fairestatetax.org [8] for more information on the estate tax, the efforts of the nonprofits coalition, Americans for a Fair Estate Tax, polling results [3] and updates on recent action and statements about the estate tax.