Estate Tax Repeal Supporters Losing Ground

In a move viewed by many as truly outrageous, Sen. Jon Kyl (R-AZ) introduced an amendment to the Senate Budget Committee’s budget resolution on March 19 – the day the country committed itself to billions of dollars for the war and its aftermath in Iraq – to accelerate the repeal of the estate tax by one year.

Under current law, the estate tax is steadily phased out over the next 7 years, repealed in 2010 for one year, and reinstated on January 1, 2011. The cost of this amendment – to move the repeal to 2009 -- was estimated at $46 billion, or more than half of the $75 billion the President is expected to request for this first stage of war in Iraq. The amendment passed in a very close vote, 51-48. Typical of Washington’s ways, however, Kyl actually suffered a major setback in his quest to repeal the tax.

Kyl’s introduction of this amendment was especially untimely given the long history of the estate tax in this country – prior to its enactment in 1916 as a permanent part of the tax structure, the estate tax was used from the early founding of the U.S. to raise funds necessary in a time of war.

Now a permanent component of our tax system, the estate tax is by far the most progressive element, affecting less than 2 percent of the very wealthiest estates in this country, while providing the resources necessary for the country’s well-being – in times of peace and in times of war. Though it touches only the wealthiest fortunes each year, the estate tax is estimated to bring in nearly $30 billion this year, with this amount continuing to rise each year. If estate tax repeal is made permanent or extended through 2013, the additional costs in lost resources will rise to more than $63 billion in 2013, alone.

Though Kyl’s amendment did pass and may be included in the final form of the House and Senate budget resolution, the vote on the amendment suggests that the significance and irony of the vote were not lost on many Senators: though the vote was a "show" vote in that it only provided for one extra year of repeal (and thus offered a relatively inexpensive vote on estate tax repeal), repeal supporters actually lost votes from what was expected. Pro-repealers started with 57 votes, but ended up with 51 (plus one more from Sen. Zell Miller (D-GA), who was not present).

While the fact that the Kyl amendment passed is troubling, the good news is that this one year acceleration of the repeal is likely to be outside of the protections of the budget resolution’s reconciliation rules. The budget resolution simply provides a blueprint – legislation must still be passed to implement this blueprint. This means that the final vote on repeal of the estate tax will still require 60 votes to pass. Nevertheless, since there is a chance that repeal advocates could try to swap out the one-year acceleration for another tax cut currently protected by these rules, it is important that Senators continue to get the message that estate tax repeal is a costly, unfair use of resources that will limit the country’s ability to address its many domestic and international priorities.

For more information, see www.fairestatetax.org.

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