'Death Tax'? Try the
'Birth Tax'
If the estate tax is repealed, future generations will
have to pay it back. |
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| By Diane Lim
Rogers June 7, 2006 Article created by The Brookings
Institution
Despite the
political gridlock in Congress that has already stymied
many tax and spending bills this spring, Senate Majority
Leader Bill Frist, R-Tenn., has announced his intention
to schedule a Senate vote on repealing or further
cutting back the estate tax sometime in June. The House
of Representatives already passed permanent repeal last
spring.
Estate-tax legislation keeps coming up
during each session of Congress, because the entirety of
the 2001 tax cuts — including a gradual phase-down of
the estate tax (to eventual repeal) — expire after 2010.
Talk of a "compromise" coming out of the Senate has
centered around how much estate-tax relief to maintain
from here forward. There's been no talk of allowing the
law to sunset and returning to the pre-2001 estate-tax
levels. But some will keep insisting on permanent
repeal.
Many members of Congress have taken to
referring to the estate tax with the "populist" label,
"death tax," and have suggested that all Americans
should worry about facing this tax when they
die.
Well, the estate tax may be appropriately
called a "death tax" for the super rich, but for the
vast majority of Americans, there is no tax due at
death. The total U.S. population stands at nearly 300
million, and in recent years there have been around 2.4
million total deaths per year. The Urban-Brookings Tax
Policy Center estimates that this year, with the
estate-tax exemption level up to $2 million (or $4
million per married couple), there will be only 12,600
taxable estates. In other words, a mere one-half of 1
percent of deaths (or 1 in 200) will be assessed any
estate tax. Calling this a "death tax" — as if it
applies to all, or even many, Americans who die — is
truly false advertising. |
| Democracy Or Plutocracy? |
| If the "Death Tax only effects 2% of American
Households, than why are so many Politicians for eliminating it? Why is it
given priority like the average citizen should care... |
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HOW DOES THE WEALTH PRIMARY
WORK?
It's difficult to
find current figures, but it's obvious to see the trend so many
politicians have taken towards tax cuts for the wealthy which
include themselves, and their largest campaign contributors.. |
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| Given the vast sums of money required to run for office, increasing
numbers of very wealthy people are going into electoral politics -- and
winning At least 71 of 435 United States Representatives and twenty-six
out of 100 United States Senators are millionaires, compared to less than
one-half of one percent of the American public. This means that
millionaires are over-represented in the House by a factor of more than
3,000 percent and in the Senate by a factor of more than 5,000 percent.
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To put this in
perspective, according to the National Center for Health
Statistics, in recent years more than 18,000 people per
year have died from an accidental fall. In other words,
an American is 50 percent more likely to die from
falling than to die owing a dime of estate
tax.
So the estate tax actually affects a very
small number of the wealthiest of families, just as it
was intended to do. Under the law, it will affect a
smaller and smaller number of families from now through
2009, when the exemption level reaches $3.5 million ($7
million per couple), and fewer than 1 in 300 of the
deceased (only 7,200) will incur any estate-tax
liability. Because the distribution of wealth is so
highly skewed, however, the estate tax at its higher
exemption level would still collect $16.3 billion for
the government in 2009 — or almost 90 percent of this
year's estate tax revenue — even though there would be
fewer than 60 percent of this year's number of estate
taxpayers.
So the difference between outright repeal and an
higher exemption level than written into the law is
small in terms of the number of households who will be
relieved of the tax (everyone versus almost everyone),
but huge in terms of lost revenue.For almost all American
families, repealing or reducing this tax would not
provide any tax relief. Yet permanent repeal of
the estate tax would cost the American people
nearly $1 trillion in tax revenues, including
interest, in the course of just the first 10 years
of extension, from 2012 to 2021. Over several
decades, this would add trillions of dollars to a
total national debt that has already reached $8.5
trillion. (A compromise of establishing a higher
exemption could cost much less than repeal, yet
still could produce a substantial loss of
revenue.) This is what all Americans should pay
attention to when it comes to the subject of the
"death tax." Repeal of the estate tax would only
worsen the financial burden that our children and
grandchildren will have to bear — a message that
the U.S. Senate should hear.
The problem is
that there is no such thing as a free tax cut,
unless — ironically in this case — you die before
the bill comes due. It is those born into our
current fiscal quagmire who can't avoid the burden
— an inherited share of the public debt that is,
to date, $28,000 per American, and rising.
However, this amount probably understates the
burden on the youngest and yet-to-be-born
Americans, because the commitments to programs
such as Social Security and Medicare will rise
over their lifetimes. By adding to the debt,
estate-tax repeal would eventually raise this
per-person burden — the "birth tax" — by thousands
of dollars over their lifetime (including more
than $3,000 from just the first 10 years after it
would take effect).
This "birth tax" is a
true cost imposed on all American babies. It
cannot be repealed, no matter how upset Americans
eventually get about it. Through the harmful
effects of deficits on national saving, these
future adults will be less likely to have the
means to pay off these debts and are in danger of
facing a lower standard of living than adult
Americans today.
So repealing the estate
tax would swap a "death tax," which affects hardly
anyone and has been found to have little effect on
economic decisions, for a higher "birth tax,"
which would be universal and seriously detrimental
to future economic growth.
Diane Lim
Rogers is Research Director of Budgeting for
National Priorities and Economic Studies at The
Brookings Institution.
motherjones.com
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| Long Live the Estate Tax! |
| Bill Gates Sr.
& Chuck Collins |
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"We are now in a second Gilded Age. Instead of
taking steps that would strengthen our democracy, we're
heading backward to the wealth inequalities of a century
ago" B.Gates.
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"Today, the estate tax
affects less than 2 percent of the richest
households, those with wealth exceeding $1
million. A reformed estate tax, with wealth
exemptions boosted to $3.5 million, would still
generate tens of billions of dollars of revenue a
year. Under such a reform, an estimated 6,000
estates a year, averaging $17 million each, would
pay the tax. In Maine, Montana, Alaska and
Mississippi--states where both senators have voted
to completely eliminate the tax--the estimated
number of estates paying the tax every year would
be fewer than twenty-five"
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A conservative is a man with two perfectly good legs who, however, has never learned how to walk forward.
Franklin Delano Roosevelt |
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