Amendment To Permanently Repeal Estate Tax

Demise of economic stimulus package brings end to efforts to make estate tax repeal permanent -- for now, at least.

Debate on Sen. Tom Daschle's (D-SD) proposed economic stimulus package came close to a standstill last week, as Senators proposed more than 50 amendments to H.R. 622, an adoption credit bill that is serving as the legislative base for this second attempt at economic stimulus legislation. Among the more alarming amendments was one offered by Sen. Jon Kyl (R-AZ) to make repeal of the estate tax permanent.

You'll recall that, as part of the overall Bush tax cuts enacted last summer, the estate tax was slowly phased out over a ten-year period, expiring in 2010. Because of cost considerations the entire tax cut law "sunsets" in 2011, which means that the estate tax, after being repealed for one year in 2010, will be reinstated in 2011. Kyl's amendment, S.A. 2758, would make estate tax repeal permanent by repealing the sunset at the end of 2010.

Permanent repeal of the estate tax has nothing to do with expediting an economic recovery -- any effect of an extension of estate tax repeal would not be felt until 2011, many years after most economists predict the economy will have made a full recovery. Nevertheless, Kyl and many others in Congress have made estate tax repeal a top priority, and many assume that even if the amendment is unsuccessful this time, they will try to bring it up again later this Spring. Adding to the likelihood of another attempt is the strong support of President Bush. In his FY 2003 Budget released today (see related story, this issue), he proposes a permanent extension of all of last year's tax cuts -- including repeal of the estate tax, which alone would cost $104 billion over the years 2003-12.

It seems likely that this amendment will be voted on this week -- perhaps as early as Tuesday, February 5 -- and it is important that we continue to remind our Senators of the significance of the estate tax to our country's well-being. The estate tax helps to provide federal and state revenues for needed programs and services, reduce concentrations of wealth, and encourage charitable giving. Now, more than ever, permanent repeal of the estate tax would be the wrong step for the country:

  • In the President's State of the Union speech, he reminded us of the need to reexamine our priorities and allocate our resources accordingly. Surely, with increased spending to strengthen our nation's military, public health systems, air transportation security, national borders, education, and with the pressing financial and health needs of America's families, we cannot afford to give further tax breaks to the country's wealthiest estates.
  • All but 6 states face budget deficits this year and because almost every state has a balanced budget requirement, they are now looking for areas to make up their billion-dollar shortfalls. It would be counter-productive for Congress to help alleviate the state fiscal crisis with an increase in Medicaid-matching rates, while it does nothing to remedy the loss of revenue states must endure with the repeal of the estate tax (49 states get revenue from the federal estate tax in the form of a "pick-up tax," or credit).
  • Finally, the Senate is currently trying to construct legislation that will help to both expedite the recovery of the economy and bridge the gap for people and the states until the recovery reaches them -- and also allow enough funds to begin meeting the many other needs of the country. Permanent repeal of the estate tax will meet neither of these aims, is very costly and, thus, does not belong in an economic stimulus package.

Again, we urge you to contact your Senators to tell them to oppose the Kyl amendment (#2758) to the economic stimulus bill or any amendment to permanently repeal the estate tax. You may use the OMB Watch contact service to email your Senators or to obtain the numbers to call or fax your Senators directly.

For more information on the role of the estate tax in the nation's charitable giving, see the National Committee for Responsive Philanthropy and the Forum of RAGS.

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