On Thursday, the U.S. House of Representatives approved a bill (H.R. 4154) that would partially extend the Bush cut in the estate tax. H.R. 4154, introduced by Rep. Earl Pomeroy (D-ND), would make permanent the estate tax rules in effect in 2009, which would prevent the estate tax from disappearing in 2010 but which would still constitute a massive tax cut for millionaires in years after that.
The tax cut legislation enacted by President Bush and his allies in Congress in 2001 included a gradual reduction in the estate tax over several years followed by repeal of the estate tax in 2010. Like almost all of the Bush tax cuts, this one expires at the end of 2010, meaning the estate tax will reappear at pre-Bush levels if Congress does nothing.
Unfortunately, many observers believe Congress is not likely to simply allow the pre-Bush estate tax rules to come back into effect in 2011 (despite the obvious need for revenue). In fact, if the estate tax is allowed to disappear in 2010, lawmakers could be more tempted to make repeal permanent or to enact legislation that would allow only a very scaled back version of the estate tax to reappear in 2011.
In other words, the good thing about H.R. 4154 is that it could prevent a situation in which Congress would be tempted to enact an even more ludicrous tax cut for families with enormous estates.
The bad thing about H.R. 4154 is that it's a massive tax cut for the richest families in America. As CTJ's recent report points out, only 0.7 percent of the Americans who died in 2007 left an estate that was taxable. In 2009 that number will be far lower because the amount exempt from the estate tax has grown significantly under the changes scheduled in the 2001 law.
The 2009 estate tax rules, which the Pomeroy bill would make permanent, significantly reduce taxes for extremely wealthy families. These are the very families who benefit the most from the infrastructure, education, stability and other things that taxes pay for and which make it possible for some Americans to accumulate massive fortunes.
Congress must prevent the estate tax from disappearing in 2010 and also must set estate tax rules as close as possible to the pre-Bush estate tax rules. Many progressive lawmakers in the House decided that the Pomeroy bill is the best that can be hoped for. Now attention turns to the Senate, which must find time to enact legislation that will prevent the estate tax from disappearing and must overcome any temptation to cut the estate tax even more.