We Cannot Make Estate Tax Repeal Permanent

by Guest Blogger, 4/29/2002

Estate tax repeal proponents, unwilling to postpone their agenda to eliminate the country’s most progressive tax, even in the face of an ever-increasing number of costly national priorities and an estimated $100 billion deficit for this fiscal year (see related story, this issue), have continued to push for permanent repeal at every opportunity.

Estate tax repeal proponents, unwilling to postpone their agenda to eliminate the country’s most progressive tax, even in the face of an ever-increasing number of costly national priorities and an estimated $100 billion deficit for this fiscal year (see related story, this issue), have continued to push for permanent repeal at every opportunity.

The latest vehicle tapped for this controversial measure was the Senate’s energy bill, which was itself already embroiled in a heated 5-week long debate. To avoid further delay to the energy bill the extraneous tax legislation would have created, Senate Majority Leader Tom Daschle (D-SD) secured a deal with Minority Leader Trent Lott (R-MS) by which the Senate’s most ardent and active repeal voices (Sens. Jon Kyl (R-AZ) and Phil Gramm (R-TX)) agreed to withdraw their repeal amendment from the energy bill in return for Daschle's agreeing to allow a separate vote on repeal later this Spring.

Likelihood of Passage

Senate rules require 60 votes to make repeal permanent, and many observers had assumed that the repeal advocates were still many votes shy of this magic number. In a "Sense of the Senate" vote on last month's farm bill, however, the Senate showed its nominal support for permanent repeal in a 56-42 so-called "message vote." This vote made it clear that repeal advocates were much closer to the 60 votes they need to make repeal permanent. (The two members not voting, Sens. Robert Bennett (R-UT) and Pete Domenici (R-NM) are strong opponents of the estate tax and would likely vote to make repeal permanent.) Unlike the Sense of the Senate vote, which has no legislative force, this upcoming vote will move permanent repeal quickly along the legislative process, as the Senate will be using a House-passed bill calling for permanent repeal. This means that the bill could go straight on to the President, who has urged the Senate to pass permanent repeal legislation and would surely sign the bill with great fanfare.

Many observers have noted that Lott, Gramm, Kyl and other outspoken repeal proponents are hoping that November’s close mid-term elections will pressure a few more Senators to vote for making full repeal permanent in this upcoming vote. Foremost among the reasons put forth by Kyl and Gramm in their floor speeches on the matter are the owners of small farms and family businesses liable for the tax and the promise of a powerful economic boost offered by making repeal permanent. An upcoming May 22 Capitol Hill rally and lobbying campaign led by repeal advocates will likely be carrying a similar message.

The facts do not support either of these arguments: IRS statistics show that fewer than 2% of the nation’s family farms and small businesses pay this tax as it is currently structured – the number of farms and businesses will likely drop further as the exemption increases over the next 10 years. In all, only 48,000 of the wealthiest estates pay any estate tax in any given year. Nevertheless, the federal government receives, on average, $33 billion each year from the tax, and state governments receive an additional $6 billion each year. A recent Joint Committee on Taxation (JCT) report shows that repeal would cost nearly $100 billion over 10 years, and more than $55 billion in the first year of full repeal.

To these purely financial costs, however, must be added the opportunity costs of not investing this money in the many needs of localities, states, and the country as a whole. While the country continues to ready its first responders at home and wage war abroad, it must also contend with the aging of its population and its infrastructure. Around the country, people continue to ask that these needs -- health care for all, affordable prescription drugs for its seniors, education for its young, and job training and child care to help its families transition with the economy -- be placed above tax cuts of any sort. With so many pressing concerns, we hope that the small, but vocal group of repeal advocates will put the country’s well-being above that of their estates. At the very least, they should allow for a reform that would ensure small farms and small businesses were protected while allowing the estate tax to continue in its long tradition of redirecting a portion of the wealth held by the top 2% of the country to the security and development of the country as a whole.

Nonprofits to Preserve the Estate Tax, a coalition of nonprofits from around the country that opposed permanent repeal during last year’s tax cut debate, is reemerging to counter this latest effort to eliminate the estate tax. The coalition will continue to oppose permanent repeal on the grounds that repeal:

  • Is fiscally irresponsible

  • Violates our nation’s sense of fairness

  • Will have a powerful negative impact on states

  • Will hurt charities

To read more about the estate tax preservation efforts of OMB Watch and the Nonprofits to Preserve the Estate Tax, see OMB Watch's Estate Tax Page. If you would like to receive updates on this work, or take part in it, please email estatetax@ombwatch.org and include your name, organization, phone number and fax number.