Death Tax Repeal In Perspective
Among the frustrations of producing a monthly newsletter is that when you read this in September, yesterday’s Senate passage of death tax repeal will be old news. Moreover, President Clinton will have responded, the political conventions will have been held and the fall campaigns will be in full swing.
But when both houses of Congress vote to repeal the estate tax, I can’t help but comment.
While we who produce this publication have been avid supporters of death tax repeal since our beginnings, we have also been skeptical concerning the likelihood of that happening. Indeed, despite the actions of the Senate and the House, the President promises a veto and as yet, the votes to override aren’t obvious. Senate Minority Leader Tom Daschle, D-SD, promises “this isn’t going anyplace.” So let us not count our chickens before they hatch and let us not yet revisit our wills to see how they would change without the death tax driving estate planning.
Still, we believe a celebration is in order. Good sense and economic reality have prevailed over governmental avarice and political demogoguery to the benefit of all Americans.
While H. R. 8 has many sponsors of both parties, 65 House Democrats and nine Senate Democrats voting for the bill (and four Senate Republicans opposing it), the measure is still being treated as partisan politics by the President. The issues are by now well known and Senate debate was entirely predictable.
Those in favor pointed to the tax’s negative impact on job creation, to distortions caused by tax-driven estate planning, to the burdens and jeopardy inflicted on small businesses and farms. Democrats like Senator Max Cleland (GA) simply pointed out that the tax is unpopular (polls show that repeal is supported by upwards of 75% of voters) and “just not fair.” Those against said that the tax cut just benefits the rich and that the government needs the money.
The bill that goes to President Clinton is a clean one. Efforts to tack on amendments and trade-offs were defeated handily. The bill also represents a compromise in several important ways. Assets remain liable to capital gains tax. The step-up in basis will be eliminated. The repeal is phased in over a decade, despite the complications that will cause for estate tax planning and estate executors.
We hope that the President will have thoughtful discussions with Democratic Senators supporting repeal, notably Blanche Lincoln of Arkansas, Dianne Feinstein of California, Robert Torricelli of New Jersey and Ron Wyden of Oregon. He should talk to the significant number of members of the House Black and Hispanic caucuses – strong Democrats who support repeal because they believe the tax punishes those in their communities who practice initiative and self-reliance, and that the measure drains scarce capital from those who know how to apply it in areas of our society needing it most.
The economic case against the estate tax is genuine.
With repeal, businesses will grow. Jobs will be created. The impact on the federal budget, said to be $105 billion over the 10 year phase-in, is minor. Congressional rules forbid consideration of the savings of the cost of collecting the tax (think how many estate tax returns are audited and wind up in court), the positive impact on other tax collections (income, capital gains, etc.), or of the revenues generated from the increased economic activity resulting from death tax repeal.
Only two percent of Americans will be directly impacted by estate tax repeal. There are no Congressional districts where anything more than a tiny minority of voters are affected. Class rhetoric about the undeserving rich aimed at the 98% who don’t experience the cost and pain of death taxes, has prevailed over fairness, logic and economic growth for years.
But finally, substantial, bi-partisan majorities of both houses have understood that American voters reject cynical manipulation with respect to estate taxes. That is an amazing accomplishment in and of itself. Victory is in sight. Even though the fight has been long and hard, that the system can reform itself in the face of the politics of envy restores faith that America really is about opportunity, achievement and freedom.