The Writing on the Wall for the Estate Tax

In a vote late Friday evening, the Senate passed an amendment that called for the Senate “To repeal or reduce the estate tax, but only if done in a fiscally responsible way.” At this point, this is a largely symbolic vote, since “a fiscally responsible way” could be interpreted in interesting ways (so to speak). But it’s very disturbing. Supposedly liberal Senators like Patti Murray (D-MicrosoftWA) and Elizabeth Warren (D-MA) voted for it.

Just so everyone is clear on how the current estate tax works, the first $5 million are tax free, then it scales up rapidly to a forty percent rate. We’re not leaving inheritors penniless by a long shot.

Given the deficit über alles approach of the current Congress (which is a separate problem), any estate tax cuts will have to be made up somewhere else. That’s probably why the New York senate delegation opposed this, even though there are a lot of wealthy estates in New York: they know if they don’t tax dead rich people, they will have to tax living rich people (who vote and donate). If you can’t tax dead rich people, whom can you tax?

Needless to say, this is yet another example of how our political system is completely focused on the needs of the wealthiest Americans.

I can’t even begin to describe how disappointed I am in Sen. Warren. I didn’t donate early on (back in exploratory committee days) so she would sympathize with reducing the estate tax. Not sure how I was supposed to see that one coming either. Just another Democratic betrayal, I suppose.

The good news is that this means that the only legitimate reason to preserve the filibuster–to protect the estate tax–really doesn’t seem relevant in this legislative environment. Now there’s no reason at all to protect it.


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4 Responses to The Writing on the Wall for the Estate Tax

  1. Karen says:

    Perhaps that is why she did it.

  2. Min says:

    For a long, long time liberals have been accused of gov’t giveaways to curry favor with voters. Their answer to that has always included a claim of fiscal responsibility. Besides, fiscal conservatism has always been a part of the Democratic Party, going all the way back to Andrew Jackson. The trouble is that now what is fiscally responsible in boom times is fiscally irresponsible. But you are not going to get the Dems to discard the fiscal responsibility label.

  3. Dave Dell says:

    The federal estate tax, my understanding of it as a former Revenue Agent – it was not my specialty but I was exposed to it, was originally enacted to level the playing field between the states. Some states had estate taxes and some did not. The wealthy would move to a different state prior to death to avoid the taxation. It’s why we allow a deduction against the federal estate tax for state level estate taxes. The elimination of the estate tax would bring back those days. States (and counties in some cases but the legislation would probably be at the state level) would have to repeal their estate tax laws to compete.
    The estate tax at almost any level brings in very little in the way of revenue (relatively speaking) but it does provide a lot of non-profits with revenue that might be reduced. Additionally, it employs a lot of lawyers and accountants. The problems continue with the tax basis of inherited property. Without the estate tax we would have no “stepped up basis”. (Google it.) It would also affect the gift tax which is actually a sub-set of estate taxation, once again affecting “basis” in property.

  4. kaleberg says:

    We should get rid of the estate tax, but we should treat inheritances over a certain amount as ordinary income.

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