It is time to get past the scare tactics that have now become common any time Congress discusses the federal estate tax.
The multimillionaires and billionaires who walk among us have already been well cared-for, thank you, by many politicians who want to pretend they’re looking out for the dead.
The estate tax has steadily declined since 2001, with the top rate falling from 55 percent to 45 percent now, and exemptions rising from $1.3 million per couple in 2001 to $7 million this year. That means $7 million is tax-free. Not surpringly, only two-tenths of 1 percent of all estates are required to pay any federal tax at all on an inheritance.
This is not good enough for some, who push for repeal or so-called “compromises” that are tantamount to repeal. Meanwhile, our federal deficits are mounting and creating debt that will fall to the children of middle-income America, if not the grandchildren of dead billionaires.
As stated this week by Chuck Marr, federal tax policy director for the nonpartisan Center on Budget and Policy Priorities:
In the aftermath of Hurricane Katrina in 2005, Iowa Senator Charles Grassley stated that “it’s a little unseemly to be talking about doing away with or enhancing the estate tax at a time when people are suffering.” What the senator said remains true today: given the current economic crisis and the human anguish it has caused, it would be more than “a little unseemly” to shrink what remains of the estate tax.
The Institute on Taxation and Economic Policy has produced a good factual summary of how the estate tax affects people in every state. Here are some of the key numbers for Iowa:
Number of Estates Owing Tax: 2006 — 237; 2007 — 158; 2008 — 225
Percentage of Estates Owing Tax: 2006 — 0.9 Percent; 2007 — 0.6 Percent; 2008 — 0.8 Percent
Those estates that do pay tax represent windfalls to beneficiaries of vast fortunes, the contents of which in large measure were never taxed before.
Is it a greater priority to absolve those beneficiaries of the need to contribute to public services — and make everyone else in the United States borrow billions more from overseas to pay for it — or to establish reasonable rules once and for all to assure the very wealthiest in the nation pay taxes?
Do we pass on millions tax-free to the heirs of American aristocracy, or do we pass on billions or trillions of debt to America’s teen-agers?
How can these be difficult questions?
Posted by Peter S. Fisher, Research Director