Realizing that full-out repeal of the estate tax is no longer a viable option, estate tax opponents are touting a "reform" proposal by Senator Jon Kyl:
The estate tax is one the most progressive features of the federal income tax structure and deserves to be left intact. Eliminating the estate tax, either through full-out repeal or "reform" would be nothing more than an undeserved tax break for the wealthiest of the wealthy at the expense of America's wage-earning families.
Under Mr. Kyl's approach, the estate tax would not kick in until the value of one's assets at death exceeded at least $3.5 million. That's overly generous; a $2 million exemption would be ample to protect the hard-working families, entrepreneurs and farmers that estate tax foes claim to care about most. Still, it's in the ballpark. With an exemption of $3.5 million, only the top 0.3 percent of estates would be subject to the tax. Huge estates are precisely those that should be taxed most heavily, because the larger the estate, the more likely it is to be made up of investment gains that were never taxed during the owner's lifetime.
Where Mr. Kyl's plan really implodes is in its drive to cut the tax rate on big estates by some two-thirds, to 15 percent. A $3.5 million exemption, together with a top rate of 15 percent, would cut the taxes of America's wealthiest families by some $550 billion during its first 10 years. That would be nearly as bad as repeal itself.