With all the talk about federal budget deficits and families hit hard by unemployment during this recession, you would think the last thing Congress would want is a tax cut for millionaires. So, it seemed a sure bet that Congress would prevent a massive one that was scheduled under the Bush administration from taking effect this year.
The 2001 tax cut law enacted by President George W. Bush and his allies in Congress gradually shrank the estate tax each year until eliminating it altogether in 2010. Like almost all the Bush tax cuts, this change expires at the end of 2010, meaning the estate tax will come back at pre-Bush levels in 2011 if Congress does nothing. But allowing the estate tax to disappear even for a year sets a terrible precedent.
Only a tiny fraction of families, those with gigantic fortunes, are impacted by the estate tax. They have benefited more than any other Americans from the educated workforce, infrastructure and stability that government provides and that taxes make possible. So it's entirely reasonable that these families pay a tax on the transfer of their enormous estates from one generation to the next, particularly since the majority of the value in these estates is capital gains income that has never been taxed.
Democratic leaders always supported the estate tax and obviously had plenty of time to plan to repeal (or at least modify) Bush's estate tax break. The House did exactly that late last year when they passed a bill that would make permanent the estate tax rules in effect in 2009 (which is still a big break for families with big estates, compared to the pre-Bush rules).
Pathetically, the Senate failed to act.
That's right. There is no federal estate tax in effect right now. Some pundits have wondered if there will be an uptick this year in unexplained deaths of elderly wealthy people coinciding with visits from their children. We think an early death is more likely for the public services that will have to be cut to make up the lost revenue if repeal (or any proposal close to repeal) is made permanent.
Call Congress Now!
United for a Fair Economy is providing a toll-free number and information that people can use to call their members of Congress and urge them to reinstate the estate tax. Every member of the House and Senate -- particularly those who claim to care about budget deficits -- needs to hear this message. Click here for information from UFE.