This vote was on an amendment by Blanche Lincoln, D-Ark., that would allow for future legislation that would establish an estate tax exemption level of $5 million indexed for inflation. The amendment also would set the maximum estate tax rate at 35 percent, and make some other changes to existing law. The amendment was offered was offered to the budget resolution that serves as the blueprint for Congress’ budget priorities in fiscal 2010. The budget resolution sets overall spending targets for the Appropriations committees and outlines other budget rules.
The estate tax is the tax charged on property that’s willed to someone upon their death (hence why Republicans often refer to the tax as the “death tax.”) Easing or repealing the estate tax has been a priority for fiscal conservatives for some time. Republicans argue that the estate tax hampers small businesses and family farmers; they also say the estate tax amounts to “double taxation.”
“This amendment provides real relief to our family-owned businesses. In a time when our government has handed out billions upon billions to failed Wall Street banks, it is time we provide a little relief to our businesses on Main Street that are in need of help right now,” Lincoln said.
Other Democrats counter that attempts to repeal or ease the estate tax are mainly for those who are already wealthy, since the tax affects a relatively small number of people. In order to be subject to an estate tax, the estate being willed must exceed a total taxable value of $1 million – according to the Internal Revenue Service, only 2 percent of estates are subject to the estate tax.
Harry Reid, D-Nev., said it is “so stunning, so outrageous, that some would choose this hour of national crisis to push an amendment to slash the estate tax for the super wealthy.”
“The proposal now before us would take $100 billion of American taxpayer money … over the next few years and spend it on slashing taxes on the estates of the wealthiest two-tenths of 1 percent of Americans. So 99.8 percent of Americans would derive no benefit—none. In fact, 99.8 percent of Americans would actually see their tax dollars redirected to the estates of those who are at the very top of the economic food chain,” Reid said.
The amendment was adopted by a vote of 51-48. Every Republican present voted for the amendment. Of Democrats present, 10 voted for the amendment and 46 voted against it, including the most progressive members. The end result is that the measure went forward with language that would allow for future legislation to ease the estate tax.
The Middle-Class Position:
Middle Class Opposes. The estate tax, the most progressive component of the federal tax code, applies only to Americans lucky enough to inherit substantial fortunes. In fact, only 0.6% of deaths result in taxable estates. By taxing inherited wealth, the tax preserves the American tradition of rewarding hard work, not inherited privilege and wealth. Although the amendment does not fully repeal the estate tax, as has been proposed in the past, the legislation would still cost approximately $442 billion over ten years compared to current law. This significant reduction in revenue would benefit only the wealthiest 3 of every 1,000 American estates worth millions of dollars. While conservatives argue that the estate tax harms small farms and business, very few such estates are subject to the tax.
The amendment would adversely affect aspiring middle-class and middle-class Americans by burdening them with more of the cost of public services while allowing accumulated wealth to be passed on for generations. Those who work for their money would be forced either to pick up a bigger share of the tax bill or to suffer cuts in services essential to middle-class families and communities.
From the Experts:
“This proposal is both fiscally irresponsible — it would pave the way for a significant increase in long-term deficits and debt — and unnecessary to protect small businesses and farms, nearly all of which are already exempt from the tax under the 2009 estate tax rules, which President Obama has proposed to extend. The amendment also would lead to significant reductions in charitable contributions, while benefiting only the wealthiest 0.28 percent of estates.” – Chuck Marr and Jason Levitis, Director of Federal Tax Policy and Senior Policy Analyst, Center on Budget and Policy Priorities, April 3, 2009
“Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward a plutocracy.” – Warren Buffet, Chairman and CEO, Berkshire Hathaway, November 14, 2007
Beyond this Bill:
For years wealthy opponents of the estate tax have campaigned for its repeal. Although this amendment is an improvement over complete abolition, the legislation remains indicative of a tax code that is weighted against middle-class Americans and towards the superrich. Since 2001, the amount exempt from the estate tax has increased while the maximum tax rate has decreased. This means that aspiring middle-class and middle-class Americans face the possibility of an increasing tax burden and cuts in the public services they rely upon. Stabilization of the estate tax exemption and rate are only fair to those who must pay the tax; however, legislation should fix the exemption and the tax rate at levels that maintain the tax’s important revenue stream. The estate tax is an important contribution by the wealthy who have benefited most from the favorable social and economic conditions maintained by public policy.
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Injustice Index Facts
Top estate tax rate and maximum exemption in 2001, respectively: 60%, $675,000
Top estate tax rate and maximum exemption in 2009, respectively: 45%, $3,500,000
Percentage of estates that will benefit from the amendment: 0.28
Estimated cost of the amendment between 2012 and 2021, according to the Center on Budget and Policy Priorities, in dollars: $440 billion
Percentage of the estate tax paid by households in the top 1% of earners: 81.1
Percentage of the estate tax paid by households in the top 20% of earners: 99.7
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