death tax

Max Sawicky sawicky at epinet.org
Fri Sep 1 04:25:40 PDT 2000



> Looks like the Reps may have the votes to override Clinton's veto of
> estate tax repeal. 60 Dems voted for it in the House. Here's a
> talking points sheet being circultated by United for a Fair Economy.

Some of these points will have an effect opposite to that intended. Others are just wrong.


> DON'T REPEAL THE ESTATE TAX!
>
> Talking Points and Rebuttals
> (Substantial sections are excerpted with permission from the
> Center for Budget and Policy Priorities and Citizens for Tax Justice)
>
> THE ESTATE TAX IS ONE OF THE MOST PROGRESSIVE, FAIR TAXES WE HAVE
> - The estate tax is the federal government's only tax on
> accumulated wealth. It helps reduce concentrations of wealth and
> power. Repealing this tax will greatly widen economic inequality.

"greatly" is the wrong word. Right now the tax collects only $28 billion in revenue a year. Given the extent of wealth holdings by the rich, this is not a very big shovel.


> - The estate tax raises a good deal of money without bothering
> almost 99 percent of us, encourages charitable giving and promotes
> America's core economic and democratic values.

o.k.


> REPEALING THE ESTATE TAX WOULD CREATE A MASSIVE WINDFALL FOR THE
> COUNTRY'S WEALTHIEST FAMILIES
> - Only the richest 1.4% of Americans are subject to the estate tax.

Fewer, actually. Since only 2% of those who die have taxable estates, it's 2% of the percentage of those who die.


> Ninety-eight of every 100 people who die face no estate tax
> whatsoever.

Right. Though we might also say anyone who is dead faces nothing at all.


> - Only the biggest estates are subject to the tax: An estate must
> exceed $675,000 in 2000 for an individual (the exemption will rise to
> $1 million by 2006). Couples can exempt $1.35 million from the estate
> tax in 2000 (rising to $2 million by 2006).

Among other offsets, right.


> HUGE LOSS OF REVENUE IF THE ESTATE TAX IS REPEALED
> - In 2000, the federal estate tax is expected to raise $27 billion.
> That's more than double the total amount of federal income taxes paid
> by the bottom half of all taxpayers.

"huge" is debatable. If Congress decided to spend $27 billion on some worthy purpose, I would not say this means a 'huge' loss of revenue. Total Federal revenue is about $1,800 billion annually. This year's budget surplus exceeds $200 billion.


> - Under this bill we'd lose $105 billion over the first 10 years,
> and over half a trillion dollars in the second 10 years. Working
> people will pay for this tax cut by either cuts in services or an
> increased tax burden.

Not necessarily. We might merely have a lower surplus. And I do mean merely.


> - Repealing the tax means less funds available to help meet the
> growing costs of Social Security, Medicare and Medicaid, as well as
> our other priorities such as improving educational opportunities,
> expanding health insurance coverage, and reducing child poverty.

Bullshit. There's enough to do all of these, even if the tax is repealed. Note the self-refuting character of fiscal conservatism. If revenue is so precious, there is less of a case for any new sort of spending initiative.


> REPEALING THE ESTATE TAX WOULD REDUCE CHARITABLE BEQUESTS
> - A study by Treasury Department economist David Joulfaian found
> that eliminating the estate tax would reduce charitable bequests by
> about 12 percent overall (about $1.7 billion in 1997).

o.k.


> FARMS AND SMALL BUSINESSES ALREADY GET ESTATE TAX RELIEF
> - The family farmer is the poster child of the anti-estate-tax
> movement, but in truth, less than one in 20 farmers leaves a taxable
> estate, and the typical farm estate's tax payment is only about
> $5,000.

right.


> - Family-owned businesses are also a small part of the estate tax -
> less than 3% of total assets for estates worth less than $2.5 million.
> - The estate tax already offers sizeable special tax breaks to
> protect family businesses or farms.

right again.


> ESTATE TAX RATES ARE NOT AS HIGH AS SOME BELIEVE
> - A combination of permitted exemptions, deductions, and credits,
> together with estate planning strategies reduced in 1997 the
> effective tax rate to less than one-third of the 55% top marginal tax
> rate -- on average estate taxes represented 17% of the gross value of
> the estate.

don't know where this number comes from, but it's in the right ballpark. Most recent estimate is 19% for estates larger than $2.5 mill, 13% for smaller ones.


> A LARGE PORTION OF THE VALUE OF ALL ESTATES HAVE NEVER BEEN TAXED
> - Unrealized capital gains constitute the bulk of the largest
> wealth accumulations. These unrealized gains have never been taxed
> and without the estate tax, they would remain untaxed forever.

Yes. Also a large part has already been taxed. The bill that passed the Congress fixes the untaxed income issue, on paper. This was tried in 1976 and immediately repealed because it was unadministerable.

More interesting politically is that the 'fix' in the bill -- namely forcing heirs to pay capital gains on assets bequeathed to them -- means a tax increase for the less rich; an income tax increase. As you can guess, the gains only outweigh the losses for the rilly rilly rich.


> - The estate tax is not a "death tax" on a person who died. It's
> like an income tax on an heir who has inherited a fortune.

More precisely, it's a tax on large transfers of wealth. (It's the Estate and Gift Tax, in actuality.)

Daddy Warbucks



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