Estate Tax: March 2008 Archives
Citizens for Tax Justice has released a new report explaining that the budget resolution approved by the House of Representatives last week deals with tax policy in a more responsible way than the version approved by the Senate. The differences between the two resolutions must be ironed out by a House-Senate conference committee that will negotiate a final version to be approved by both chambers.
The resolution approved by the House offers more responsible tax provisions in a number of areas.
First, the House budget plan uses “reconciliation instructions” that would make it easier to pass a bill to provide relief from the Alternative Minimum Tax (AMT) without increasing the deficit. Any further increase in the national debt is likely to be borne, in the long-run, by the middle-class, so it would be unfair to take on debt to provide AMT relief, which mostly benefits families that are relatively wealthy. The Senate plan, unfortunately, does not use this approach because the Senate assumes that an AMT patch will be deficit-financed.
Second, the House plan does not emphasize cutting the estate tax the way the Senate plan does. CTJ’s data shows that the estate tax now affects fewer than 1 percent of estates. The Senate decided, however, to cut the estate tax for these few, wealthy families and to finance this tax cut with surpluses that may never materialize.
Third, the House plan would not cut taxes on better-off Social Security recipients. Such a tax cut, which the Senate plan includes, would only benefit those seniors who are well-off.
The House-Senate conference committee that takes up the budget resolutions should reject the choices that the Senate has made with regard to taxes and choose the more responsible path set by the House of Representatives.
A new report from Citizens for Tax Justice shows that the federal estate tax continues to reach less than one percent of estates, despite the complaints of anti-tax activists that middle-class people are crushed by the so-called "death tax." In most of the states that are home to Senators who want to abolish the estate tax, the percentage of estates affected is particularly low.
Under the Bush tax cuts, the estate tax is scheduled to change to allow even more estates to escape federal taxation. In 2004 and 2005 estates worth up to $1.5 million (or $3 million for estates owned by a married couple) were exempt from the estate tax. (Most of the estates listed in the new report were subject to that exemption.) Since then, the exemption has increased to $2 million ($4 million for married couples) and in 2009 the exemption will increase to $3.5 million ($7 million for married couples). In 2010 the estate tax will disappear entirely. After 2010 all the Bush tax breaks expire, including this generous treatment of estates.
Some lawmakers want to make permanent the complete repeal of the estate tax, which would cost over a trillion dollars over a decade. As this data makes clear, that would benefit very few families with the biggest estates.
