The Estate-Tax Shuffle
In the midst of a sea of front-burner issues--the war in Iraq, the employment picture, the Roberts confirmation process--something has been smoldering away in the background and now seems ready to jump back to prominence: the issue of whether to permanently repeal the federal estate tax.
The situation is strange: Bush's 2001 tax cut bill will repeal the estate tax altogether in 2010, but it will return in 2011 because of the "sunset" provisions of the original legislation. And now, after many votes in the House favoring outright repeal, pressure is being brought on the Senate to follow through.
I am for repeal, for a number of reasons I will probably go into at another time. But I think the most interesting thing about the discussion is that the numbers the Left is throwing around are completely wacky. I was listening to NPR's Morning Edition today and heard a piece on the subject. Featured in it was Joel Friedman of an outfit called the Center on Budget and Policy Priorities, who threw out a number of $1 trillion as the amount that the federal government stands to lose if the estate tax is repealed. They, and other groups, allege that this can only result in massive cuts in Social Security or Medicare benefits.
I say here and for the record, this is hogwash. Estate tax receipts are a very small part of the government's revenue stream, amounting to only about $21 billion in 2003. The CPBB will have you believe a) that the CBO's and JCT's projections are accurate, which is laughable in itself, b) that this money will be squirreled away in coffee cans by the heirs, and never spent in any taxable way (somebody buying a big boat and paying sales and capital-gains taxes in the process) or used in such a way that increases the tax base (say, someone starting a business), and finally c) that because of this, the government will have to borrow enormous sums in order to cover the gap. There is also no mention of what $1 trillion is in today's dollars, but I can tell you that it will be a lot less in 2021, when their examination ends.
But all credit to them--there's no better way of galvanizing public support than by frightening them with numbers that don't make sense.
The situation is strange: Bush's 2001 tax cut bill will repeal the estate tax altogether in 2010, but it will return in 2011 because of the "sunset" provisions of the original legislation. And now, after many votes in the House favoring outright repeal, pressure is being brought on the Senate to follow through.
I am for repeal, for a number of reasons I will probably go into at another time. But I think the most interesting thing about the discussion is that the numbers the Left is throwing around are completely wacky. I was listening to NPR's Morning Edition today and heard a piece on the subject. Featured in it was Joel Friedman of an outfit called the Center on Budget and Policy Priorities, who threw out a number of $1 trillion as the amount that the federal government stands to lose if the estate tax is repealed. They, and other groups, allege that this can only result in massive cuts in Social Security or Medicare benefits.
I say here and for the record, this is hogwash. Estate tax receipts are a very small part of the government's revenue stream, amounting to only about $21 billion in 2003. The CPBB will have you believe a) that the CBO's and JCT's projections are accurate, which is laughable in itself, b) that this money will be squirreled away in coffee cans by the heirs, and never spent in any taxable way (somebody buying a big boat and paying sales and capital-gains taxes in the process) or used in such a way that increases the tax base (say, someone starting a business), and finally c) that because of this, the government will have to borrow enormous sums in order to cover the gap. There is also no mention of what $1 trillion is in today's dollars, but I can tell you that it will be a lot less in 2021, when their examination ends.
But all credit to them--there's no better way of galvanizing public support than by frightening them with numbers that don't make sense.
posted by Jeff at 5:05 PM
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