Obama plan creates a path to effectively kill the estate tax

[somone]

http://www.huffingtonpost.com/gary-d-bass-phd/obama-tax-cut-compromise_b_793426.html

Obama Tax Cut Compromise Capitulates on Estate Tax
Gary D. Bass, Ph.D.

President Obama's tax cut deal with congressional Republicans, if enacted by Congress, will achieve what President George W. Bush could not get done: create a path to effectively kill the estate tax.... Obama would write a $163 billion check to the nation's richest families and reverse himself on his campaign promise to let the tax cuts for the wealthy expire. There's no shortage of commentary on the extension of the lower tax rates for those earning more than $250,000, but what deserves special attention is how Obama inexplicably gave away the store to Paris Hilton and other heirs to vast fortunes through the evisceration of the estate tax.

Temporarily repealed in 2010, the estate tax is ready to spring back to life in 2011 with its former vigor, returning to the parameters of 2000 with a 55 percent rate on inheritances above a $1 million exemption ($2 million for couples). In 2009, the year before the estate tax was temporarily put on hold, there was a 45 percent tax on estates greater than $3.5 million ($7 million for couples). At the 2009 levels, less than one quarter of one percent (0.25 percent) of estates with people passing away would incur any estate tax liability. In fact, as a compromise on the estate tax, Obama has been calling for extending the 2009 levels in his annual budget requests. Progressives, however, had been calling for smaller exemption levels ($1 million to $2 million ($2 million to $4 million for couples)) and higher rates (45 percent to 55 percent, and even higher for the super-wealthy). Conservatives and some like the U.S. Chamber of Commerce have argued that the estate tax, the nation's most progressive tax, should be eliminated. However, it has been clear that Obama would not agree to permanently repeal the estate tax.

So it would seem that, as Obama agreed to temporarily extend the Bush tax cuts, he would also agree to temporarily extend the estate tax at 2009 levels. But that isn't the deal he struck. Instead, he went with a proposal being pushed by conservatives to lower the tax rate to 35 percent and to increase the amount exempt from any tax to $10 million for couples. This is exactly the strategy that conservatives and their wealthy benefactors have united behind over the past couple of years. The scheme was hatched by Sens. Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) and is known as Lincoln-Kyl. (Lincoln hails from the home state of the Waltons, heirs of the Wal-Mart fortune, and Kyl is the senator who is holding up Obama's effort to get the START treaty ratified in the Senate.) Under Lincoln-Kyl, only 0.15 percent of estates would pay any tax at all. That's about half of the number of estates that would have owed tax at 2009 exemption levels. Additionally, compared to keeping the 2009 levels, it adds another $90 billion to the deficit. Basically, the Lincoln-Kyl proposal, now endorsed by Obama, eviscerates the estate tax.

The estate tax is not just an important revenue stream (one that could lower the deficit by $100 billion through 2015 and by one quarter of a trillion dollars through 2020 if formulated correctly), it also ensures that the resources of those who benefit the most from our economic system -- the tippy top of the wealth ladder -- strengthen the very system that has allowed them to prosper. Even more importantly, the presence of an estate tax provides an incentive for the wealthy to contribute to charitable organizations. And in this harsh economic environment, institutions that feed the hungry, shelter the homeless, and train jobless workers are acutely feeling the crush of an increased demand for their services as their funding sources dry up...

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1. Nixon went to China. n/t

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