I've been going back and forth all day, trying to decide exactly whether I'm for, or against, the estate tax.
As Congress gets ready to take a long-delayed vote that could repeal what Republicans branded the "death tax" back in the early 1990s, it seems that editorial writers everywhere are coming down squarely on one side of the issue or the other.
President Bush phased out the estate tax as part of his first-term tax relief package, but after a one-year hiatus scheduled for 2010, the levy is scheduled to be phased back into existence. According to the Tax Policy Center, about 12,600 estates will be taxed in 2006. The tax applies to inheritances in excess of $2 million -- and less than 1 percent of all taxpayers.
Most reports say the vote to get to a vote will be close, with 60 votes needed to defeat a filibuster and a total of 56 Senators already saying that the plan to vote for the repeal. The House passed repeal months ago, in a 272-162 vote, with more than 40 Democrats agreeing to abolish the tax.
The Joint Committee on Taxation projects that a repeal would cost about $600 billion over the next decade -- a number that worries some legislators as the costs for hurricane reconstruction and wars in the Middle East continue to be racked up. However, it's worth noting that that figure doesn't include the revenue stream provided by a late 1990s compromise between former-Senator Bob Kerrey, D-Neb., and Jon Kyl, R-Ariz. (Kyl is still leading the repeal charge in the Senate today).
Under the deal, Republicans agreed to eliminate a provision of the tax code allowing for what is called the "step-up-basis at death on capital gains," meaning that no capital gains tax is applied to the increase in the value of the stock or business over the original owner's lifetime. The JTC's figure show that the change raises about $50 billion a year, more than the estate tax's annual $30 billion.
Of course, the big question is who will bear that extra $20 billion -- certainly not all of the same members of the top tax bracket currently getting hit by the estate tax -- and what sort of gifting procedures could chip away at those same revenues?
But trying to take a by-the-numbers approach to the issue seems impossible, and not just because so many of the numbers don't add up. One recent op-ed letter in the Washington Post quoted Teddy Roosevelt, who said that it makes sense to raise part of the money to pay for a government from a tax on "fortunes swollen beyond all healthy limits." In the interest of greater society, doesn't it make sound philosophical sense to redistribute that concentrated wealth for the greater good of society? It's a noble argument, but probably rhetoric that will be buried under talk of rising deficits and the reckless federal spending of recent years.
Both the Center on Budget and Policy Priorities as well as the Tax Foundation have posted reports detailing the statistics surrounding the issue, and for less a less academic take, there's recent ads from t he pro-tax Coalition for America's Priorities and the anti-tax American Family Business Institute -- both featuring skewed statistics, and, in the case of the former, a Paris Hilton look-alike. I'm hoping none of those swing senators are swayed by such appeals, but instead base their vote on a combination of head and heart.
I'd like to hope I'll feel the same the day the value of my own estate hits the $2-million mark.
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