The Senate budget debate began this week against a
backdrop of war and recession, rising unemployment and surging
foreclosures, runaway health care costs and diminishing insurance
coverage — to name just a few of the nation’s big problems. But for
Senator Blanche Lincoln, Democrat of Arkansas, and Senator Jon Kyl,
Republican of Arizona, the most pressing issue is clear: America’s
wealthiest families need help. Now.
The
two senators plan to propose an amendment to deeply cut estate taxes
for the fraction of the top 1 percent of the population still subject
to those levies.
The proverbial millionaires next door — the
plumbers, contractors and accountants who amass substantial wealth
through hard work and modest living — are not the intended
beneficiaries of the proposed cut. The Obama budget already takes care
of them, because it retains today’s law, which imposes the estate tax
only on couples with property worth more than $7 million, or
individuals with property worth more than $3.5 million. That means 99.8
percent of estates will never — ever — pay a penny of estate tax.
The
heirs of the remaining 0.2 percent of estates are who Ms. Lincoln and
Mr. Kyl are so worried about. Their amendment would increase to $10
million the level at which the estate tax kicks in. It would also lower
the top estate-tax rate to 35 percent from 45 percent.
With all
the serious work before Congress, it is a colossal waste of time to
have to rebut the false claims and warped premises of ardent estate-tax
cutters. Ms. Lincoln’s and Mr. Kyl’s colleagues in the Senate should
make short work of it and move on to urgent matters.
In
addition to creating the false impression that the estate tax
eventually hits everyone — by mislabeling it a “death tax” — opponents
routinely denounce the 45 percent top tax rate as confiscatory. In
fact, the rate applies only to the portion of the estate that exceeds
the exemption. As a result, even estates worth more than $20 million
end up paying only about 20 percent in taxes.
Another
misleading argument is that the estate tax represents double taxation.
In truth, much of the wealth that is taxed at death has never been
taxed before. That’s because such wealth is often accrued in the form
of capital gains on stocks, real estate and other investments. Capital
gains are not taxed until an asset is sold. Obviously, if someone dies
owning an asset, he or she never sold it and thus never paid tax on the
gain.
If those arguments aren’t enough to stop the Lincoln-Kyl
show, lawmakers should consider this: The estate tax creates a big
incentive for high-end philanthropy, because charitable bequests are
exempt. On Tuesday, Independent Sector, a nonpartisan charitable
coalition representing thousands of public charities, private
foundations and corporate-giving programs, urged the Senate to reject
the Lincoln-Kyl amendment and to keep the tax as proposed in the Obama
budget.
Finally, reducing the estate tax from the level
proposed by Mr. Obama would cost an additional $250 billion in forgone
revenue over 10 years, at a time when the nation already has to borrow
heavily for real needs. Ms. Lincoln and Mr. Kyl have made rumblings
about offering a way to offset that cost. Let’s hear what they say, and
once we see how they’ve come up with a quarter-trillion dollars, let’s
talk about better ways to use the money.
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Article in Opinion (6 of 30) »
A version of this article appeared in print on April 2, 2009, on
page A26 of the New York edition.
