New OMB Watch Analysis Indicates that Current Low Estate Tax Rates Are Unaffordable, Should Be Rolled Back to Earlier Levels

PRESS RELEASE
-For Immediate Release-
October 2, 2012

Contact: Brian Gumm, (202) 683-4812, bgumm@ombwatch.org

New OMB Watch Analysis Indicates that Current Low Estate Tax Rates Are Unaffordable, Should Be Rolled Back to Earlier Levels

WASHINGTON, Oct. 2, 2012—In a new analysis published today, OMB Watch makes the case for a strong, effective estate tax. The analysis lays out the importance of the tax in raising federal revenues and the ongoing budget debate and presents options for moving forward on the estate tax as the expiration of the Bush tax cuts looms at the end of the year.

"The revenues that our nation could raise with a strong estate tax could help avert some of the severe cuts proposed for education, the environment, transportation, and health care programs, which are critical to the well-being and quality of life of the American people," said Katherine McFate, President and CEO of OMB Watch.

Titled Extending Current Estate Tax Rates May Force Spending Cuts in Education and Health in 2013, the analysis points out that the estate tax has played a modest but crucial role in checking the growing inequality of wealth in the United States. Without such a tax, this inequality would grow at a faster rate, leaving the middle class further behind and doing significant damage to the economy in the process.

One estate tax option the analysis explores would roll the estate tax back to pre-2001 levels, when estates above $1 million were taxed at a top rate of 55 percent, but it would adjust the exemption level for inflation since the year 2000. Under this option, more than 98 percent of estates in America would not be subject to the estate tax, but the nation would raise an estimated $418 billion over the next ten years.

Doing nothing and letting Bush-era estate tax levels expire would have a similar effect, though the exemption level would not be adjusted for inflation. This option would raise $536 billion over ten years. Other options, including continuing current, low estate tax levels or repealing the tax altogether, would make inequality and the budget deficit situation worse.

Patrick Lester, Director of Fiscal Policy at OMB Watch, said, "With disparities between the wealthy and middle class continuing to grow under current law, now is not the time to reduce or continue already low rates of taxation on wealth inherited from the top one percent of estates." He concluded, "Rolling estate taxes back to levels of just a few years ago could contribute substantially to deficit reduction and reduce the burden on other budget priorities, such as education, transportation, and health."

The full text of the analysis is available at http://www.ombwatch.org/estate-tax-analysis-oct2012.

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