With the estate tax to be repealed at the end of 2009 unless new legislation is passed, the political debate over the economic and moral value of the estate tax is being renewed.
The Senate Finance Committee is considering the Baucus proposal, which I wrote about last week. The House Ways and Means Committee is considering H.R. 436, a bill which would make permanent the $3.5 million exemption and a top tax rate of 45%. An additional tax would be imposed on estates over $10 million to phase out the effects of graduated estate tax rate and the unified credit. In addition, H.R. 436 would limit the availability of the controversial valuation discounts for transfers of minority and/or restricted interests in property.
Last week, the Senate approved a budget amendment that would raise the estate tax exemption from $3.5 million to $5 million, and reduce the tax’s maximum rate from 45% to 35 percent. It approved another amendment blocking that estate tax cut until an equal amount of tax relief was afforded, in aggregate, to people making under $100,000. The budget is not law, so don’t get too excited. It’s hard to see how Congress can cut taxes that much while also increasing spending.
For recent editorials for and against the estate tax, see the following:
Spend It in Vegas or Die Paying Taxes, by Arthur B. Laffer, Wall Street Journal, 4/2/09, arguing that the estate tax is economically inefficient and creates the wrong incentives:
Today in America you can take your after-tax income and go to Las Vegas and carouse, gamble, drink and smoke, and as far as our government is concerned that’s just fine. But if you take that same after-tax income and leave it to your children and grandchildren, the government will tax that after-tax income one additional time at rates up to 55%.
The Forgotten Rich, New York Times, 4/1/09, arguing that estate tax opponents create wrong impressions of the reach and effect of the estate tax, and that the estate tax creates the right incentives:
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.
More Tax Cuts for the Rich?, Washington Post, 4/2/09, arguing that proposals to reduce the estate tax in the current economic environment are “outrageous and nonsensical.”
No surprises, given the sources. I will link more articles as I come across them.
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