Gingrich-Forbes Plan to Repeal Capital Gains & Estate Taxes Would Balloon Deficit to Aid the Very Richest

Repeal of all income taxes on capital gains, coupled with elimination of the federal estate tax on the largest estates--as proposed by House Speaker Newt Gingrich this week at the behest of publishing heir Steve Forbes--would add at least $467 billion to federal budget deficits over the next six years. The overwhelming share of this enormous sum of money would go to the best-off one percent of the population.

According to an analysis of the Gingrich-Forbes plan by Citizens for Tax Justice:

• Repeal of all income taxes on capital gains would cost the Treasury at least $342 billion over the fiscal 1997-2002 period. That estimate excludes the likely large additional costs due to new tax-sheltering activity that the new tax loophole would produce.
• Three-quarters of the tax reductions from repeal of income taxes on capital gains would go to the 1.4% of taxpayers making more than $200,000 a year (including, of course, Steve Forbes). The average annual capital gains tax cut in this top income group (ignoring new tax shelters) would be $21,850.
• In contrast, the average capital gains tax cut for the median income family would be only $11 a year.
• Repeal of the estate tax would reduce federal revenues by $125.3 billion over the next six years. Large monetary losses could also be experienced by charities, whose donations would probably fall in the absence of the estate tax.
• The current estate tax applies only to the largest 1.2% of all estates (those valued at more than $600,000 after deductions), and 95% of the estate tax falls on estates valued at more than $1 million. Thus, the benefits of eliminating the estate tax would by definition go only to the very wealthiest estates.

"These numbers speak for themselves," noted CTJ director Robert S. McIntyre.

Tables on the effects of repealing the capital gains and estate taxes follow.