Estate tax media statement

I would like to thank everyone here for coming out to talk about a very important issue, the estate tax.

Today, I would like to talk about the current status of estate tax law and pending legislation; as well as some new research that measures what effect a repeal might have on charitable giving.

As you probably know, current estate tax allows people to deduct charitable donations from their estate, allowing them to reduce their tax burden. If you remove this incentive to give to charity, you will reduce the amount of charitable giving in this country.

First, let me start off by summarizing the current law and proposed legislation.

The estate tax currently exempts the first 1 million dollars of estates per individual, and 2 million dollars for married couples. This exemption level is scheduled to increase to $3.5 million in 2009, before being fully repealed in 2010 and then reinstated in 2011 and beyond.

Current legislative attempts to repeal the estate tax aim to make permanent the 2010 repeal. Last year, the repeal extension passed the House of Representatives, but failed to get the required 60 votes in the Senate.

This summer the house passed this extension to the repeal. The Senate is expected to take up the issue soon; and in recent speeches, members of the current administration have indicated that repeal is a top priority.

Those of us that believe in a fair estate tax for multimillionaires, think that the estate tax is an essential part of a fair tax system, raises badly needed revenue, encourages charitable giving, and promotes democratic ideals.

First, the tax system ought to observe a fundamental and basic principle of fairness: those that can pay more, should pay more. Wealth is perhaps the best indicator of who can afford to pay taxes -- and the estate tax is the only major wealth tax at the federal level.

In addition, the super-wealthy, in particular, have benefited from American capitalism and the protections and services of the US government. The wealthy have an obligation to the State because they derive special advantages from the mere existence of the American system of government. Currently, only about the wealthiest 2 percent of estates pay any tax at all. In 2009, the last year before repeal, less than one half of one percent of estates will pay any tax, and the first $3.5 million would be tax-free.

The tax is not a "double tax," much of the wealth of multi-millionaires is in the form of unrealized capital gains, which has never been taxed. In addition, unless you believe that the current tax system is free of loopholes, there is a large amount of income that has never been taxed, not even once.

Secondly, with the government running deficits over 500 billion dollars, and states facing their worst crisis since the Second World War, the estate tax raises badly needed revenue. Over the next two decades, extending the estate tax repeal would cost 982 billion dollars -- that's a huge number, nearly 1 trillion dollars in lost revenue.

To illustrate this cost, the National Priorities Project has calculated what this amount of money could buy in your state. The analysis should be in your packet.

Thridly, the estate tax provides an important incentive for charitable giving.

In theory, charitable giving could conceivably increase, if the estate tax were repealed since people would have greater after tax wealth. Or, alternatively, giving could decrease since a repeal would also remove the tax incentive to give to charity. The total impact depends upon the strength of these two effects.

To answer the question of which effect is stronger, you can look at the actual historical experience of past changes in estate tax law. This kind of empirical evidence from past changes shows that repealing the estate tax would indeed cause a very significant reduction in charitable giving. A study completed by the Brookings institution this summer, calculated that a full repeal of the estate tax in 2001 would cost our nation's charities to lose about 10 billion dollars in charitable giving. That's 10 billion dollars each and every year.

To give you a sense of the magnitude of this loss, 10 billion dollars is the same as the annual giving of the largest 110 foundations in the country -- the Gates foundation, the Casey foundation, the Ford foundation, the [__________] here in [__________], etcetera.

Research conducted by us at OMB Watch, shows what effect an estate tax repeal would have on charities across the 50 states. If the estate tax were to have been repealed in 2001, [______'s] charities would have lost [______] million dollars in charitable gifts. So if a repeal of the estate tax were to take effect, [________'s] charities would likely have [_______] million dollars less to serve the needs of [________'s] citizens.

In addition, an estate tax repeal would convey the message that charitable giving at death is no longer encouraged. It would remove the incentive for estate planning -- a point at which many donors are "introduced" to charities; and it would eliminate a major "selling point" for charities.

At a time when the nation is relying even more heavily on charities, and when charities are already struggling from a weak economy and a slumping stock market, the impact from an estate tax repeal would place yet another burden on the charitable organizations that serve us so well.

Finally, the estate tax embodies the ideals of this great nation.

As Franklin Roosevelt said, "Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our government."

With the increasing importance of money in the political system, inherited economic power often translates into inherited political power -- an idea explicitly rejected by our country's founders.

For more information, I urge you to visit the website of Americans for a Fair Economy at fairestatetax.org. I would be happy to answer questions on these issues after the rest of the speakers have their say.

Thank you.

Americans for a Fair Estate Tax

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