On June 18th, the House of Representatives passed H.R. 8, the “Death Tax Repeal Permanency Act of 2003,” which would make permanent the repeal of the estate tax, currently scheduled to take place in 2010 (thus the proposed law would take effect only in 2011 and beyond). The bill passed the House by a vote of 264-163, primarily with Republican backing, and with 41 Democrats and four Republicans breaking rank with their colleagues. (Vote Results)

Rep. Earl Pomeroy (D-ND) offered an alternative to the estate tax bill, but it failed to win a majority in the House of Representatives. The vote was largely along party lines with a vote of 188-239 with two Republicans, and 13 Democrats breaking rank. This alternative would have raised the wealth exemption level immediately, so that the first $3 million in the estate per individual and $6 million per married couple would be tax-free. Currently, the first $1 million is tax-free; it will rise to $35 million in 20009. ( Vote Results)

Argument for repeal

The primary argument used by House Republicans in favor of a repeal is that small farmers and small business owners are overly burdened by the tax and are forced to sell their assets as a result of the tax and the death of the owner. Yet given the high exemption rate and special provisions for farms and businesses, only a very small number of business owners or farmers face any pressure to sell because of the tax.

No one wants to force the sale of viable farms and businesses, but reasonable reform can accomplish the goal of protecting the small number of farms and small businesses subject to the tax, while maintaining the ideals of the estate tax. For example, on behalf of its 300,000 farmer and rancher members, the National Farmers Union has spoken out against repeal and for reasonable reform.

What now?

The results in the House were expected, and the issue now moves once again to the Senate. In the 108th Congress, similar bills have not received the necessary 60 votes to make it through the Senate. Americans for a Fair Estate Tax, a coalition of nonprofit and community groups, is working to educate the public and put pressure on the Senate to stop the full repeal. As part of this effort, OMB Watch is gathering letters and position statement against full repeal; see http://www.fairestatetax.org for details. If you have a position statement you would like posted, let OMB Watch's John Irons (jsirons@ombwatch.org) know.

Did you know…

• The total cost of the repeal would be roughly $1 trillion over 20 years.
• Currently, only the wealthiest 2% pay any tax, and tax payments average only about 20% of the estate. At the 2009 exemption level of $3.5 million, only 0.5% would pay any tax.
• In 1998, taxable estates with more than half of their assets in a family owned farm or business represented only 0.06% of those that died that year.
• The estate tax includes an unlimited deduction for charitable giving, thus providing a valuable incentive to donate to charity. Best estimates say that a repeal would cost charities $10 billion per year in lost charitable giving – this would be potentially devastating to the charity community.

Quotes

“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.” - Franklin D. Roosevelt

"The man of great wealth owes a peculiar obligation to the State because he derives special advantages from the mere existence of government." – Teddy Roosevelt

“To use the easily handled problems of family farmers and small-business owners as justification for repealing the entire tax, thereby giving an enormous tax cut to a few extremely wealthy households, is simply dishonest demagoguery.” Henry Aaron, (Brookings)