Some action this year on the estate tax is essential. The tax is now at 45 percent and exempts estates under $7 million per couple or $3.5 million per individual. Unless extended, the tax would be zero in 2010 before resuming in 2011 at 55 percent with a mere $1 million exemption.
How to extend the tax is a hot political question. The Republicans have long sought to repeal it a little at a time, demonizing it as a “death tax.” America’s richest families have spent hundreds of millions lobbying to save themselves tens of billions to abolish the tax. Democrats generally support the tax as part of the traditional progressive tax system.
President Obama’s proposed budget would continue the tax at its present level through next year and onward. An alternative, proposed by Sens. Blanche Lincoln, D-Ark, and John Kyl, R-Ariz. and approved by the Senate, would raise the exemption to $l0 million per couple and cut the tax to 35 percent. Arkansas is home to the Wal-Mart’s Walton family, one of the nation’s richest, who have been generous supporters of the anti-tax lobby. Sen. Lincoln has argued that people paying the estate tax employ more than half the workers in Arkansas and need the help to create more jobs.
Maine’s two Republican senators stood by their party on the issue, Sen. Susan Collins as a co-sponsor. Her spokesman Kevin Kelley said, “The amendment was in line with her long-standing support for reform of the death tax at rates and exemption levels that protect America’s small businesses.” Sen. Olympia Snowe said the “roller coaster” of changing rates and exemptions must end, asserting that the amendment would “provide certainty and stability in the tax code.”
The nonpartisan Center on Budget and Policy Priorities calculates that only 30 estates in Maine are liable under the tax in 2009.
Nationally, only 100 small businesses and farm estates would owe any estate tax at all in 2011 if the 2009 rules are extended, according to the Brookings Institution-Urban Institute Tax Policy Center. It says the biggest winners under the Lincoln-Kyl amendment would be the very wealthy, and it would cost the budget $91 billion more than the Obama proposal.
Aside from its cost and lopsided benefits, the amendment, with its unanimous Republican support, could foreshadow a replay of an old Republican strategy to “starve the beast” — cut revenues so as to block such Democratic goals as health care reform.
The House-Senate conference should settle the matter and accept something closer to President Obama’s proposal than the expensive and unnecessary Senate version.