================================== NEW DEMOCRATS ONLINE -- NEW DEM DAILY -- Pithy news and commentary from the DLC. ================================== [ http://www.ndol.org ]
24-APR-02
Three Whoppers About the Estate Tax Repeal
Last week the U.S. House, in a ritualistic, party-line vote, enacted legislation making all of last year's federal tax cuts permanent. Now the Senate has agreed to Republican demands for a vote on a slightly narrower measure making the most expensive "temporary" tax cut from last year, the repeal of the federal estate tax, permanent.
We recognize the arguments for eliminating federal estate taxes, although we do not find them compelling. That, at least, is a legitimate policy debate. But this latest GOP campaign for permanent estate tax repeal is being buttressed by three specific claims that are just plain whoppers:
The first is that the "temporary" nature of last year's estate tax repeal was some sort of nefarious Democratic trick that brave Republicans are now determined to reverse.
In fact, Republicans devised the language that phased out the estate tax over ten years and then -- presto, chango -- revived it in full in the eleventh year. The cynical reason for this "trick" was obvious to everyone in Washington at the time: to disguise the true, long-term costs of the Bush tax cuts, in the full knowledge that Congress would not suddenly resurrect the estate tax at current rates the year after it had been eliminated.
The reason for the budget ruse points the way to whopper number 2: that the country can now suddenly afford the full, permanent repeal of the estate tax that we could not afford just a year ago. Roughly $4 trillion in anticipated surpluses have vanished from future budget estimates since the day the Bush tax cuts were enacted. The costs of extending the estate tax repeal into another decade beyond 2012 would decisively cut into Social Security revenues at exactly the time that they will be most needed to deal with the retirement of the baby boom generation. If we couldn't afford more estate tax cuts last year, we surely cannot afford them now. But congressional Republicans are able to blithely ignore the cost issue because Congress is now operating under a five-year budget resolution, which makes the whole issue of tax rates in 2012 and beyond a matter for manana.
The third whopper is nicely represented by a recent attack launched against Senate Finance Committee Chairman Max Baucus (D-MT) by Montana State Sen. Mike Taylor, a Republican running for Baucus' seat. According to The Associated Press, Taylor demanded that Baucus return a small contribution from a leadership PAC associated with Senate Majority Leader Tom Daschle (D-SD) on grounds that Daschle, by opposing efforts to make tax cuts permanent, is "taking an ax to the financial future of Montana's family farms."
The idea that a total repeal of federal estate taxes is necessary to protect the ability of small business owners or small farmers to pass on their assets to their families is perhaps the biggest whopper of all. Opponents of a total repeal in Congress, including Daschle, have consistently proposed increasing the exemption from estate taxes to a level that would protect most small businesses and family farms from any estate taxation.
It speaks volumes about the values of contemporary conservatives that they are so absorbed with the tax rates of multi-millionaires in 2012 at a time when we are fighting a battle against terrorism, when our homeland security structure is in disarray, and when the nation's long-term fiscal picture is cloudy. But if they wish to make their continuing assault on the principle of progressive federal taxation their primary appeal to the country, they should at least be honest about it.
Related Material:
"Death and Tax Cuts," by Bruce Reed, Blueprint magazine, Volume 10, Spring 2001: http://www.ndol.org/ndol_ci.cfm?contentid=3303&kaid=125&subid=163
"Fairness Matters," by Robert J. Shapiro, Blueprint magazine, Volume 10, Spring 2001: http://www.ndol.org/ndol_ci.cfm?contentid=3301&kaid=125&subid=163
"The Vanishing $4 Trillion," New Dem Daily, January 24, 2002: http://www.ndol.org/ndol_ci.cfm?contentid=250113&kaid=131&subid=192