Reinstating Estate Tax Would Pay for Jobless Benefits
Refusing to extend unemployment benefits to 1.2 million Americans by adding to the deficit, Senate Republicans by a 41 to 57 margin on Thursday again filibustered the Democratic billion jobs bill. As it turns out, most of the roughly $35 billion still needed to pay for it could largely come from a single source: the estate tax. But thanks to the same GOP obstructionism, Republicans have chosen a one-year windfall for a handful of billionaires over millions of Americans in the throes of financial crisis.
Already scaled back from its original $200 billion price tag, the $112 billion jobs package includes tax cuts, critically needed aid to states and the extension of unemployment benefits. On Sunday, Maine Republican Olympia Snowe wrote to Harry Reid suggesting Democrats cut further by offering a stand-alone unemployment insurance bill. For a Republican Party which had no problem with deficit spending during times of prosperity, helping struggling Americans during a recession is another matter altogether, As the New York Times reported:
The Senate Republican leader, Mitch McConnell of Kentucky, has insisted that the bill not add to the deficit. Democrats argued that they had found ways to cover the entire cost of the $112 billion measure, with the exception of the $35.5 billion extension of unemployment benefits, which some Republicans said they could accept...
"The only thing Republicans have opposed in this debate are job-killing taxes and adding to the national debt," Mr. McConnell said. Anticipating that Democrats would reject his proposal, he added, "Their commitment to deficit spending trumps their desire to help the unemployed."
Of course, as they made crystal clear with the perpetual effort to kill the estate tax, Republicans' commitment to the rich trumps everything else.
In 2009, only 1 in 500 American estates paid taxes. In 2008, the tax produced $25 billion for the U.S. Treasury even in a year when the stock market was battered. But barring new legislation in Congress, in 2011 the estate tax rate will jump back up to its pre-2001 level of 55%, starting at $2 million per couple. In December, the House voted 225-200 to maintain 2009's rate of 45% beginning at $3.5 million per person or $7 million per couple. But as 2009 ended, Jon Kyl led the successful GOP effort to block the bill, ensuring the temporary one-year expiration of the estate tax on January 1st, 2010:
"It's a problem that doesn't have to exist if they'll just leave the existing law alone and let the rate go to zero, which is where everyone wants it to be."
Well, not everyone. Just, as the numbers show, the very, very rich.
Under the 2009 rate, 99.8% of estates owe no estate tax at all. And as the Center on Budget and Policy Priorities (CBPP) showed, over 62% of estate tax revenue comes from the "extreme wealthy" with fortunes greater than $20 million. "Only three percent of taxes owed" are paid by estates under $5 million. But as the Washington Post explained in April 2009, those are precisely the pockets Jon Kyl aided and abetted by Democrat Blanche Lincoln wants to line:
The estate tax is scheduled to disappear in 2010, only to be resurrected the following year at its 2001 level, when it applied only to estates worth over $2 million per couple at a rate of 55 percent. In fact, no one expects it to return to that level -- although letting it do so would be a far more rational response to the current crisis than the Lincoln-Kyl approach. Rather, President Obama has proposed holding the tax at this year's level: an exemption of $7 million per couple, with a 45 percent rate for amounts beyond that; this would cost $484 billion over 10 years. Senate Finance Committee Chairman Max Baucus (D-Mont.) has endorsed this solution, with indexing for inflation. This would hardly be punitive. At that level, 99.76 percent of estates would incur no tax whatsoever. Those who owe would pay, on average, $2.25 million less than they would have paid at the 2001 exemption level. Why in the world should these folks get more of a tax cut?
For their part, Lincoln and Kyl want to start at that $5 million individual threshold and adopt a lower 35% tax rate. In response, Vermont Democrat Bernie Sanders this week sponsored a new estate tax overhaul, which at a time of record income inequality and growing fortunes for the wealthy would provide a richer haul for the Treasury. As the Wall Street Journal summed up Sanders' plan:
Mr. Sanders and his co-sponsors said, "It's time for multi-millionaires and billionaires to pay their fair share."
Under the proposal, as in 2009, the exemption would be $3.5 million for an individual, or as much as $7 million for a couple, with a tax rate of 45%. But estates with taxable assets between $10 million and $50 million would pay a 50% rate, and estates valued above $50 million would pay 55%. A further 10% surtax would apply to assets above $500 million.
The changes would be retroactive to Jan. 1 of this year.
As Kyl suggested on the Senate floor in December, Republicans want to bury the estate tax once and for all. And to be sure, The Republican scam over the so-called "death tax" is as bogus now as it was when President Bush first perpetrated it nine years ago. (The House GOP budget, fittingly unveiled by Rep. Paul Ryan on April Fool's Day 2009, would eliminate the estate tax altogether. CBPP estimated that ending the estate tax would cost the United States Treasury $1 trillion over 10 years.) While Nevada Senator John Ensign griped, "It destroys a lot of small businesses and a lot of family farms and ranches in America," House Minority Leader John Boehner (R-OH) groused:
"People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farm in order the pay the taxes."
As it turns out, of course, not so much.
While CBPP estimated that only 1 in 500 estates is impacted by the current law, the Tax Policy Center quantified last year just how few family farms or small businesses are actually impacted by the estate tax proposals under consideration:
We estimate that under the Obama proposal, 100 family farms and businesses would owe tax. (We define such estates as those where farm or business assets are valued at under $5 million and comprise the majority of estate assets.) The Lincoln-Kyl proposal would cut the number to 40. Even under current law, fewer than 2,700 family farms and businesses would owe tax.
Sadly, right now no one is paying the estate tax. And in the case of the heirs of Texas billionaire Dan L. Duncan, a man who passed away in March, that literally means a multi-billion dollar pay day at the expense of everyone else.
Especially the 1.2 million increasingly desperate Americans whose unemployment benefits just came to an end, courtesy of the Republican Party. As Rhode Island Democratic Senator Sheldon Whitehouse rightly noted on Friday, with their trade-off Senate Republicans made very clear whose side they are on:
"What's particularly galling about this is that the Republicans cut this lifeline for middle class families, unemployed through no fault of their own, in the same month the first multi-billion estate passed tax free through to the heirs of a tycoon because of the Bush tax cuts, which weren't paid for. So, if you are concerned about the deficit, it's very selective concern about the deficit when you are letting billionaires' estates go through to their heirs untaxed, and cutting off the lifeline for unemployed families."