CHN: House Votes to Permanently Repeal Estate Tax; Multi-Millionaires to Benefit
On Wednesday, April 13, the House voted to repeal the estate tax permanently by a vote of a 272 to 162. Rep. Kenny Hulshof (R-MO) sponsored H.R. 8, which will cost $290 billion over the next ten years. The bill is not paid for, and so will deepen the deficit and/or add pressure to cut government services.
The estate tax affects only the most wealthy families in the United States. Under current law, the estate tax would phase down until 2010, when it would disappear altogether for a single year. In 2011, since the tax cut legislation enacted in 2001 was temporary, the estate tax would return to its pre-2001 level. This year, estates larger than $1.5 million are exempted from the estate tax and the top rate is 47 percent. The IRS estimates that fewer than 60,000 estates will be subject to the tax this year (fewer than one percent of all households). In 2009, the year before the total repeal goes into effect, the estates valued at less than $3.5 million will be exempt from the tax and the top rate will be 45 percent. An estimated 38,000 estates will be subject to the tax that year.
Earlier in the day the House rejected a substitute amendment offered by Rep. Earl Pomeroy (D-ND), that would have kept the estate tax structure but lifted the exemption level to $3 million for individuals ($6 million for married couples) in 2006, increasing to $3.5 million for individuals ($7 million for married couples) in 2009. Under this approach, 99.7 percent of estates would not have to pay an inheritance tax. The amendment failed by 194 to 238.
The full repeal bill will drain the federal treasury to give tax breaks to the super-wealthy at a time when Congress is dealing with record deficits and considering a budget that cuts services for low-income families. For the cost of full repeal, Congress could avoid every single proposal to cut services to elderly, children and people with disabilities now included in the budget plan. More than anything else, the passage of the estate tax reveals that Congress is not serious about addressing the deficit – and the cuts being made to services that help the sick and needy are not truly about fiscal discipline.
The Americans for Fair Estate Tax sent each member of Congress a letter expressing opposition to H.R. 8, noting the estate tax is an essential source of federal and state revenue and provides incentives to charitable giving. The Congressional Budget Office (CBO) estimates that repeal of the estate tax will have a dramatic effect on philanthropy. If the estate tax had not existed in 2000, CBO estimates that charitable donations would have been $13 billion to $25 billion less that year.
Proponents of the estate tax also pointed out that permanent repeal could actually hurt more farmers and small business owners than current law, do to complicated provisions on how property is valued. The Department of Agriculture has estimated that a greater number of farm estates would have more tax liability from the changing property value rules under full repeal than the number of farms that would benefit from repeal.
Lobbyists for the families of the Mars candy, Gallo wine and Campbell soup companies have worked for a long time to repeal the estate tax, since they and a handful of other families will gain billions. They have succeeded before in the House. Outlook in the Senate is unclear. If he wishes to move a repeal bill, Senator Jon Kyl (R-AZ) a chief proponent of full repeal and a sponsor of bill similar to H.R. 8, must find at least 59 like-minded Senators to avoid a filibuster. However, it appears he is still a few votes short of the needed 60.
A more likely outcome is the fashioning of a compromise deal that would leave the estate tax structure in place but lift the exemption level. Last week, Senate Democratic Leader Harry Reid announced that Sen. Chuck Schumer (R-NY) would be the lead negotiator for Democrats on a compromise deal. Advocates are concerned that a compromise will result in far too much revenue loss, placing greater burdens on those with far less ability to pay.
Washington Post op-ed: The Paris Hilton Tax Cut http://www.washingtonpost.com/wp-dyn/articles/A45305-2005Apr11.html
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