Repealing the Estate Tax
Commentary: Despite rhetoric to the contrary, this tax cut would help only the wealthiest Americans and harm everyone else.
May 15, 2006
|
|
Article created by the the Center for Economic and Policy Research.
“Money to get power, and power to guard the money,” was the motto of the powerful Medici family in 16th century Florence. It is getting to be a successful modern political strategy for some of America’s wealthiest families today.
A new report by Public Citizen and United for a Fair Economy shows how 18 of these families, including the Walton family of Wal-Mart fame, spent millions of dollars to push for the repeal of the estate tax. The estate tax is paid by wealthy heirs when they receive inherited wealth. Using trade associations and influential lobbyists, these extremely wealthy families stand to gain an astounding $71 billion from the repeal.
In the next month or so, the White House and Republican leaders are hoping to permanently get rid of the estate tax. About 99.7 percent of Americans are not rich enough to be affected by the estate tax. The existing exemptions will allow their heirs to get whatever is left to them without paying any taxes.
But that other 0.3 percent increasingly find themselves in the role of “the deciders.”
Proponents of repeal have gone to great lengths to convince people that the estate tax is a threat to small businesses and farms. The story of people having to sell the family farm to pay the tax was getting fairly good play until Pulitzer-Prize winning New York Times reporter David Cay Johnston found that there were no known instances of anyone having to sell the family farm due to the estate tax – even though President Bush said he had spoken with such farmers in June 2001.
The Republicans even came up with a scary-sounding name for the estate tax that became widely used: the “death tax” – it sounds ghoulish, like something out of a Stephen King novel.
Getting rid of the estate tax is consistent with the overall thrust of President Bush’s “ownership society,” which is one in which the rules are tilted ever more favorably towards owners, especially the big ones. One goal seems to be to rewrite the tax code so that owners of wealth do not pay taxes on the income that their wealth generates. Lowering the tax on capital gains has primarily benefited rich people. The same is true for cutting the tax of stock dividends. Only about half of Americans hold any stocks at all, and for those who do it is generally in retirement accounts, where they would not benefit from the stock dividend tax cut.
Many people think that such changes don’t affect them if they are not rich. But since the government does not stop spending money (the Iraq War has cost about $300 billion so far) the result of these changes is that people who get their income from labor rather than ownership – the overwhelming majority of Americans – will end up paying more taxes so that rich people can pay less. Repealing the estate tax would be another big step in this “rich get richer” program, costing the Treasury about $1 trillion in the first decade.
A few months ago, the repeal of the estate tax looked like it would pass Congress. But the anger over rising gasoline prices in the face of record oil company profits has begun to hurt President Bush. Coming on the heels of a succession of scandals and a deeply unpopular war, the gasoline controversy has driven Bush’s approval rating down to a personal worst of 33 percent and has begun to weigh on the Republican party’s prospects for the November Congressional elections. Do the Republicans really want to add another trillion dollars to the future U.S. national debt in an election year, just so a handful of rich families can pass even more wealth to their children? Only if they can do it when no one is looking.
Mark Weisbrot is co-director of the Center for Economic and Policy Research.
