Rarely in our history has so much effort been exerted to give so much money to so few under such false pretenses as the current campaign to eliminate the estate tax.
No matter how many high fives Republican operatives give each other for promoting the phrase "death tax," the facts remain. Theirs is an effort to drain hundreds of billions of dollars from the federal Treasury for the tax-free perpetuation of our nation's largest personal fortunes. This is counter to core American values, fiscal sanity and any semblance of fairness.
Gene Sperling is a Senior Fellow at the Center for American Progress. He served in the Clinton administration as the President’s National Economic Adviser and Director of the National Economic Council.
Despite the political urban legend that tax cuts for multi-million dollar estates are a political winner among working Americans, it's just not so. Any politician willing to spend even a few moments explaining how few benefit and how much is lost will find that the public is too sensible to swallow full or virtual repeal.
A critical point that the pro-repeal movement obscures is that the one and only issue dividing us is the magnitude of the estate tax cut for the very wealthiest estates, not whether it should be cut at all. Those of us who oppose full repeal are for sensible reform.
We are committed to promoting the aspiration of Americans to build wealth that they can leave to their children and grandchildren. Sensible reform would ensure that married couples -- without the need for estate tax planning -- could leave $5 million to their heirs tax-free. For couples whose estate consists primarily of a farm or family-owned business, the tax-free legacy would rise to $8 million.
Put another way, those of us who support sensible reform propose that about 99.5% of all American families pay not a single penny in taxes on what they leave to their heirs. Not a penny. Zippo. Nothing. The overwhelming number of Democrats who oppose complete repeal would be willing to pass this type of reform today. This would create certainty and put the entire estate tax controversy behind us.
The fact that the White House does not leap to embrace a plan that is more fiscally-responsible and protects estates of up to $5 million per couple makes transparent that the entire fight against "death taxes" is a ruse. It is solely a fight for a massive tax break for the wealthiest one-half of one percent of estates. The cost to the rest of us: over $400 billion in the first ten years. (And yes, that is $400 billion with a "B.")
Repeal of the estate tax would provide $13 billion dollars in tax breaks to the around 750 wealthiest estates in 2011 alone. Imagine a civilization that brings 750 of its richest families into a room so that they can divvy up $13 billion among themselves (about $17 million a piece). And this at a time when we are in serious debt, at war with terrorists and facing a poverty rate of over 30% among our minority children.
Some advocates for complete repeal, including the Chamber of Commerce, now appear a bit nervous about this massive and naked giveaway. As a result they have blessed a compromise proposal to dramatically increase estate tax exemptions while lowering the tax rate on what's left as low as 15%. Yet, this is no compromise at all. It could still lose more than 90% as much as complete repeal -- our most fortunate 750 estates would divide up about $10 billion among themselves.
Budget and tax decisions are ultimately choices about priorities and values. Full or virtual repeal of the estate tax is a miserable failure on both counts. Consider what could be done with the hundreds of billions of dollars that would be lost by going beyond a sensible reform: We could provide 70 million hard-working Americans with progressive saving accounts so that they could build their own estates; we could nearly double our nation's homeland security budget; or we could solve nearly 40% of Social Security's shortfall.
Our founders, including Thomas Jefferson, feared the creation of an economic elite perpetuated through inheritance rather than ambition or merit. Unfortunately, the Bush Administration's step-by-step strategy to minimize taxes on capital gains, dividends and the wealthiest estates is moving us in just that direction. Unchecked, these tax cuts would mean that the overwhelming majority of working Americans would pay higher taxes on their wages than our nation's most privileged families pay on the wealth created and passed down.
With each step, these policies move us away from our founding values. In America, hard work, drive, character and talent -- not the accident of birth -- should be most determinative of one's economic and social station in life. These are still values worth fighting for.