SCOTT SIMON, host:
Part of an NPR series on taxes, today we consider estate taxes, or, as some people like to call them, death taxes. They affect a small segment of the wealthiest American tax bracket, yet the estate tax usually leads to political bickering. This election season it's been an issue in some political campaigns and it will certainly come up again if Congress starts debating whether to extend the Bush-era tax cuts this month.
As NPR's Yuki Noguchi explains, this year's tussle over estate taxes comes with some unusual circumstances.
YUKI NOGUCHI: The most unusual thing about estate taxes this year is that they don't exist - at least on a federal level. There's a quirk in the law to thank for that, something Congress - at least so far - has done nothing to remedy. The Bush administration started phasing out federal estate taxes 10 years ago, and this happens to be the only year there are none.
If Congress does nothing on January 1, it automatically kicks back up to its pre-2001 levels. One might think this makes for a great year for every beneficiary named in a will for large estates. After all, they would have paid 45 percent on everything above three-and-a-half million if their beloved died last year.
Consider those named in Yankees owner George Steinbrenner's will. He was reportedly worth over a billion dollars. If Congress imposes no retroactive tax, that's a huge windfall for his heirs. And that leads to some pretty grim jokes about the tax code creating a perverse incentive to pull the plug on granny.
But actually, the rich aren't universally happy about this year. There are those like Abigail Disney who want to see the estate tax come back.
Ms. ABIGAIL DISNEY: I take this position because I love my country. And the fact is, my grandfather could never have built the business he built anywhere else.
NOGUCHI: Her grandfather Roy's business: Disney, a name recognized everywhere on Earth.
Ms. DISNEY: Every time I use my credit card.
(Soundbite of laughter)
NOGUCHI: She became a member of a group called United for a Fair Economy, in part, she says, because she felt wealth is not fair.
Ms. DISNEY: It's absolutely an accident of my birth. And that's sort of the point, you know, that there shouldn't be dynasties built around the simple good luck of being born related to somebody very wealthy.
NOGUCHI: Abigail Disney spent a lot of time shooting a film in Liberia. There, unlike the U.S., there are no safe roads or schools and therefore no safe investments. And she says those who make money in a secure society like the U.S. also owe the society a debt.
Warren Buffett and Robert Rubin are members of the same group sharing the same philosophy. But not even Abigail Disney's family agrees with her. And there's also a mountain of money lobbying on the other side, including the Chamber of Commerce and the National Federation of Independent Businesses.
In a nutshell, they argue that bringing back the estate tax, or, as they prefer to call it, the death tax, will be hurtful mostly to small businesses, like Alarm Detection Systems.
Mr. BOB BONIFAS (Founder/CEO, Alarm Detection Systems): Well, I think I've planned enough that it would probably survive. But I would still have to go, make some major loan. You know? Maybe 10 million or something. Those are big numbers if you've already got $10 million worth of debt.
NOGUCHI: Bob Bonifas started his company 42 years ago. Like many opponents of the tax, he says it could kill businesses. In fact, the more common issue is that avoiding the estate tax sucks up lots of small business time and money. For the past three decades, Bonifas has been trying to move money into trust funds and gifts to his children and grandchildren, hoping to minimize the impact of an estate tax. Had he not done so, he says his children would likely have to sell the business when he dies, and all 220 employees' jobs might be eliminated.
What do you think is a fair estate tax rate?
Mr. BONIFAS: Zero. We've paid tax on this money. I mean why would you penalize somebody for dying?
NOGUCHI: But it's not just the government that would benefit from the return of the estate tax.
Mr. ROBERTON WILLIAMS (Senior Fellow, Tax Policy Center): One of the major reasons that people give money to charities is to avoid taxes.
NOGUCHI: That's Roberton Williams, a fellow at the non-partisan Tax Policy Center. Without any estate tax, Williams says, charitable giving could fall by up to a third.
Yuki Noguchi, NPR News, Washington.
SIMON: And you can go to NPR.org to explore our whole series on tax policy.
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