Reminder: Republican Hysteria About "The Death Tax" Is Based On Misinformation
Since the White House and Senate Republican leaders announced the framework of a deal to extend the Bush tax cuts for two years, the provisions regarding the estate tax have drawn criticism from Democrats and Republicans alike. Under the deal, the estate tax would be set at 35 percent and would only apply to estates larger than $5 million. While Democrats reportedly oppose those generous parameters, many congressional Republicans insist that any "death tax" at all is unacceptable and even "cruel." In that stance, Republicans are wrong both on policy — even at a stiffer $3.5 million threshold, the estate tax only impacted the wealthiest one of every 400 households in 2009 — and politics. The Bush tax cuts gradually reduced the estate tax from 55 percent in 2001 to 45 percent in 2009, and then sprung a political trap by completely eliminating the tax for just one year before allowing it to spring back to 55 percent in 2011. This provision, which one American Enterprise Institute scholar called "absurd-on-its-face," means that Republicans who criticize the estate tax provisions of the proposed deal are in essence opposing a 36 percent cut in the estate tax, and a threshold even more generous than the 1-in-400-estates tax proposed in President Obama's budgets.
Republicans Rail Against Any Estate Tax At All, And Exaggerate Its Impact
REP. TODD AKIN (R-MO): The death tax is gonna tax them, whereas if they'd gone out and got drunk and gambled it away, they wouldn't have to pay any tax. [Akin Floor Speech, 12/8/10]
REP. STEVE KING (R-IA): I am very concerned about midnight December 31st with the estate tax. If that-if they-if the taxes aren't addressed before the end of the year, we'll have people that are on their deathbed, families gathered around the deathbed making life-and-death decisions by looking at tax liabilities. And that is cruel, and this Congress should address this before that should happen. [MSNBC, 11/30/10]
KING: "Put me in hospice now and let me slowly die." That's what will be said. [King Floor Speech, 12/1/10]
REP. STEVE SCALISE (R-LA): If someone were to die today and have a family business that they've built up over their lifetime, they can pass that on to their family, and there's a zero percent tax on, on their passing away, a tragic event that shouldn't be made even more tragic by government coming in and confiscating 55 percent of their business to the point where the children's decision, more their grief is dealing not with the loss of their loved one, but now the fact that they have to dismantle the company that their father built for his entire lifetime just to pay the taxes to the federal government. [Scalise Floor Speech, 12/1/10]
KING: There will be those who will decide they wanna end their life so that their children don't have to pay an onerous estate tax that'll have as of midnight December 31st. [King Floor Speech, 12/1/10]
REP. GLENN THOMPSON (R-PA): There's gotta be a lotta people right now thinking about it'd be much better, more convenient to die between now and December 31st, because the estate-the death tax is zero percent. But if you're unfortunate enough and you die a minute after midnight on January 1st it's 55 percent. [Thompson Floor Speech, 12/8/10]
KING: By the way there'll be death certificates that're back-dated, too. [King Floor Speech, 12/1/10]
Despite GOP Rhetoric, Few Family Farms And Small Businesses Would Be Impacted By Estate Tax Proposals
CBPP: "Only The Wealthiest 1 Of Every 400 Estates Paid Any Estate Tax" Under 2009 Rules. According to the Center on Budget Policy Priorities (CBPP): "In 2009, for example, the exemption level was $3.5 million for an individual (effectively $7 million for a couple), meaning that estates worth less than that amount owed no estate tax. As a result, only the wealthiest 1 of every 400 estates paid any estate tax under the 2009 rules." [CBPP.org, 6/14/10; parentheses original]
- Tax Policy Center: Obama's Original Proposal Would Have Made 2009 Rules Permanent. According to the Tax Policy Center: "The Obama Administration's FY2010 budget proposes to make 2009 law ($3.5 million exemption and 45 percent rate) permanent. An alternative Senate proposal would raise the exemption to $5 million and lower the rate to 35 percent." [Tax Policy Center, accessed 9/22/10; parentheses original]
TPC: "The Vast Majority Of The Tax Is Owed By Large Estates." According to the non-partisan Tax Policy Center:
Compared with current law, the Obama proposal would cut the number of taxable estates by 87% to an estimated 6,160 taxable returns. The average estate tax bill would be about $3 million, or 19% of total estate value.
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.
The vast majority of the tax is owed by large estates. Almost 84% of the tax would be paid by estates larger than $10 million in 2011 under the Obama proposal. About half of the tax is paid by such large estates under current law. [Tax Policy Center, 4/8/09; parentheses original; emphasis added]
Republicans Broke The Estate Tax With Bush Tax Cut Expiration Date...
PolitiFact: The Estate Tax Is Set To Return To Higher Rates In 2011 As Designed By President Bush And Republicans. According to PolitiFact, "Bush reduced the tax, he did not repeal it. Rather, under his 2001 tax cut package, the estate tax reduces every year and then goes away for just a single year - 2010 - before reverting back to higher rates." [PolitiFact.com, 7/23/08]
- FactCheck.org: Current Law Sets 2011 Estate Tax At 55 Percent. According to FactCheck.org, "Under terms in the Bush tax cuts, the estate tax was phased down over several years and eliminated entirely for those who die in 2010, but it's set to return in 2011 at levels that prevailed before 2001. So just as the message says, for those dying after Jan. 1 next year, estates of more that $1 million would be subject to taxation at rates as high as 55 percent on amounts over that threshold." [FactCheck.org, 9/28/10]
AEI: Bush Tax Cuts Had "Absurd-On-Its-Face Provision That Estate Taxes Would Gradually Decline To Zero In 2010--And Then Be Fully Restored In 2011." According to Norman Ornstein, resident scholar at the American Enterprise Institute:
It is worth repeating why we are in this particular car heading toward the cliff. When the Bush tax cuts were on the agenda at the very beginning of his presidency, Republicans in Congress and the White House made a tactical choice to avoid giving Senate Democrats the leverage that a 60-vote hurdle can provide by employing reconciliation (yes, the same tool that those who applied it then condemned roundly when it was used for health care reform this year). It was tricky to use reconciliation for tax cuts, which increased deficits when reconciliation was specifically supposed to be used for revenue-neutral or deficit-reducing programs. But the decision was made to use it for this purpose--but not to violate the proviso that the plan would increase deficits outside the budget window of 10 years.
That meant a ploy of declaring that all the tax cuts would expire entirely after 10 years, including the absurd-on-its-face provision that estate taxes would gradually decline to zero in 2010--and then be fully restored in 2011. From the day after the tax cuts were signed into law, Republicans were campaigning to extend them, in effect admitting that the policy was built around a "never mind" ruse. To be fair, there were plenty of ruses in the health care reform reconciliation, so it is not as if one party is clean--this is legislative politics. But the charges now emanating from Republicans that the Democrats are going to be responsible for a huge tax hike is, shall we say, bemusing. [AEI.org, 7/21/10; parentheses original; emphasis added]
The Center for Budget and Policy Priorities prepared a chart showing that the Estate Tax top rate held steady at 45% until this year, when it fell to zero, and that under current law it would revert to 55% next year.
Permanent Estate Tax Relief For Families Act — Which No Republicans Supported — Would Have Prevented Even Larger Estate Tax Increases. From PolitiFact:
Unless Congress and the president act to eliminate it permanently, the estate tax won't exist at all for exactly one year -- 2010. ... At the end of 2010, the estate tax would return to its levels in the early part of the decade -- a $1 million exclusion and a 55 percent top rate -- though many expect that Congress would either act before then to set new levels or eliminate the tax entirely.
[O]n Dec. 3, 2009, Sestak voted with 225 other Democrats (and no Republicans) to pass the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009. This legislation -- which passed the House but stalled in the Senate -- would have established the top estate tax rate at 45 percent and set the exclusion rate at $3,500,000 per person or $7 million per couple. (This happens to be the Obama administration's proposal as well.) [PolitiFact.com, 8/24/10; parentheses original; emphasis added]