Spending Millions to Save Billions
29 May 2006The Alaska Center for Public Policy is proud to be one of hundreds of state and national organizations to sign on to a letter to the United States Senate. The sign-on letter was drafted by Americans for a Fair Estate Tax (which includes OMB Watch, United for a Fair Economy, the Center on Budget and Policy Priorities, The Coalition on Human Needs, and other organizations. More detailed information about this issue is available in a document entitled Spending Millions to Save Billions: The Campaign of the Super Wealthy to Kill the Estate Tax which was authored by Public Citizen and United for a Fair Economy. The letter follows:
We are writing to express our strong opposition to proposals to repeal the estate tax or “reform†it in ways that would render it meaningless. We understand the Senate will take up estate tax repeal and possibly vote on Senator Kyl’s “reform†proposal after the Memorial Day recess. Repealing the estate tax would slash federal revenues that are needed to meet critical challenges. Full repeal would cost nearly $1 trillion during the first full ten years (2012 to 2021), adding to the nation’s high deficits. Essential services for vulnerable populations are already being cut, including Medicaid, child support, and student loans; the nation also faces fiscal challenges posed by an aging population,
rising health care costs, unmet education needs, Social Security insolvency, and homeland security.Meeting these challenges will be much more difficult if the estate tax is repealed or “reformed†in a way that loses nearly as much revenue as repeal. Indeed, we are concerned that some estate tax “reform†proposals are simply a back-door means by which to repeal the tax. For example, Sen. Kyl’s plan to exempt the first $10 million of a married couple’s estate from the tax ($5 million for an individual) and to tax the remainder at 15 percent, the current capital gains rate, is unacceptable. Such a proposal would cost 84 percent as much as repealing the estate tax entirely, and thus is irresponsible just like permanent repeal in both its fiscal impact and its policy direction.
Repealing or drastically reducing the estate tax would benefit only a very small number of extremely wealthy heirs. Less than one percent of estates currently pay any estate tax at all. Currently, only estates larger than $4 million for a couple ($2 million for an individual) are subject to the tax, and that level is set to rise to $7 million for a couple ($3.5 million for an individual) by 2009. Gutting the estate tax — the
most progressive part of the nation’s tax system — would shift the tax burden away from people who were fortunate enough to inherit large wealth and on to middle-class people who have worked for everything they own. That runs counter to the core American value of fairness.Repealing or drastically reducing the estate tax would reduce charitable giving as well, by eliminating a powerful tax incentive to make charitable donations. A study from the Congressional Budget Office shows that if there had been no estate tax in 2000, U.S. charities would have lost $13 to $25 billion in donations that year alone. Such losses could seriously weaken the enormous variety of important organizations supported by bequests and foundations, from soup kitchens to universities. We are encouraged, however, that some people who previously called for repealing the estate tax are now
willing to discuss responsible reform options. We support the principles for responsible reform developed by the Americans for a Fair Estate Tax coalition
and urge you to review and embrace them. They state that any reform must ensure the estate tax:
- Is fair and taxes only those people who can best afford to pay.
- Continues to provide much-needed resources to federal and state governments.
- Maintains charitable giving incentives.
- Is simplified and closes loopholes.
Fair Taxes for All
At a time when our country is struggling to curb the growth of deficits and is debating deep cuts in assistance for the most vulnerable populations, we do not need nor do we support an irresponsible tax cut for the very wealthiest Americans. In fact, neither do the vast majority of the American people as a recent national survey found fewer than one in four (23 percent) favored repealing the estate tax.We urge you to support fiscal discipline and fairness by voting against both permanent repeal of the estate tax and irresponsible “reform†proposals that would be nearly as costly and would weaken our nation’s charities.