Death Tax Gaining Attention
George W. Bush presented his tax cut program in Iowa last December, and his loudest applause came when he called for the elimination of the estate tax. Indeed, every Republican presidential candidate but one were on record favoring estate tax repeal. The exception is John McCain, who is proposing raising the exemption to $5 million. “No taxation without respiration,” was one of Steve Forbes best-received lines.
Both of the Democratic candidates favor staying with the current estate tax revisions that gradually increase the unified lifetime exemption to $1 million in 2006.
Polls conducted for the 60 Plus Association have consistently shown that Americans favor death tax repeal by a margin of about 7-to-1.
In late January, USA Today ran its cover story on the “Death Tax” as it was called, in its front page headline. “Of all the ways Uncle Sam takes a cut, none may be detested more than the tax levied on an estate after someone dies. The idea of the government reaching into the grave and grabbing 37% to 60% of wealth accumulated during a lifetime is, well, ghoulish to many,” wrote USA Today staffer Owen Ullmann.
One reason for the greater attention now garnered by the death tax is that expanding wealth is making many more subject to the tax. In the dozen years between 1989 and 2001, millionaire households will have increased by two thirds, from three to five million. The number of taxable estates will increase from 45,300 in 1998 to 62,800 in 2004.
Federal government revenue from the estate tax is expected to increase during the same period from $24.1 billion to $39.2 billion, or from 1.4% of total federal revenue to 1.8%.
Still, in an era of $1.9 trillion dollar projected government surpluses, one wonders why it is necessary to tax estates to gain revenue. The argument that the estate tax is social policy to prevent concentration of wealth simply doesn’t fly with voters who see unfair double taxation when wealth generated from income that has already been taxed is passed to the next generation. Moreover, it doesn’t work. The rich do get richer and there are more of them than ever before. But as Harvard economist Gregory Mankiw points out, “Even if you want to be Robin Hood, this is not a good way to do it.”
House Ways and Means Committee Chairman Bill Archer has again promised to push repeal in Congress. Last year was the first time that both houses of Congress voted to repeal the estate tax. “This is an issue that clearly is going to be highlighted this year....it’s not going away,” Archer says.
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