Given all the talk lately about the richest one percent and the other 99 percent, it’s surprising that more attention has not been focused on one federal tax that truly does target the richest one percent: the federal estate tax.
A coalition of organizations, including Citizens for Tax Justice, has sent a letter to Congress urging lawmakers to enact Congressman Jim McDermott’s Sensible Estate Tax Act, or, alternatively, to simply allow the estate tax cuts in effect now to expire at the end of this year.
The tax cuts enacted under President Bush included a provision that gradually reduced the estate tax over several years until repealing it entirely in 2010. As part of the “compromise” legislation that President Obama signed to extend the Bush tax cuts for two years, only a very scaled back version of the estate tax was allowed to come back for 2011 and 2012. If Congress does nothing, the estate tax cuts will expire at the end of this year and the pre-Bush estate tax rules will come back into effect.
And that would be just fine with us. Despite common misconceptions that the estate tax affects a lot of Americans, only the value of estates exceeding $1 million ($2 million for married couples) would be subject to the tax, and usually larger amounts can be passed on without tax because of breaks that reduce the tax (like deductions for charitable bequests and special breaks for family businesses and farms).
The other sensible option would be for Congress to enact Congressman McDermott’s bill, which would allow the overall structure of the pre-Bush estate tax rules to come back into effect, but would simplify the rules and make them a little more generous to families who might be affected by the tax. (For example, the McDermott bill would index for inflation the exemptions that keep the estate tax from affecting most of us.)
As the letter to Congress explains, under either approach, the estate tax would affect the richest one percent of Americans, those who have benefited more than anyone else from the public investments that create and sustain a prosperous society.
For more details, see the related press release.
Photo of Congressman Jim McDermott via SEIU Health Creative Commons Attribution License 2.0