Race, Class, and the Obama-GOP Tax Deal
The House Democrats and the Congressional Black Caucus are wise in their righteous opposition of the shameful tax compromise put forth by the Republican Caucus and the Obama Administration. Their message is clear: there will be no deal until significant improvements are made to the package. We must encourage them to hold the line on that demand.
The most inexcusable part of the Obama-GOP package is the dramatic slashing of the federal estate tax even further beyond the already weakened 2009 law. Although the estate tax impacts less than 0.25% of all estates – the wealthiest of the wealthy – it has profound implications for all Americans and communities of color in particular. By curbing the transfer of unlimited wealth from generation to generation, the estate tax is an important tool for ensuring that the inequalities of generations past, including those drawn along the lines of race, do not forever haunt our nation.
For much of U.S. history, white Americans have had greater opportunities to build wealth, often with the help of the federal government programs such as the Homestead Act and the GI Bill. African-Americans were largely denied these opportunities as the weight of overt racism, Jim Crow, bank redlining, and more prevented African-Americans from closing the gap with their white counterparts. Though many of these unjust structures and policies are now gone, the inequalities they created continue to this day thanks to the power of inheritance.
Currently, African-Americans earn 62 cents and Latinos earn 68 cents for every dollar of white income. Troubling as these numbers are, the wealth disparities are even more unsettling. African-Americans have only 10 cents and Latinos have only 12 cents of net wealth for every dollar of white net wealth. To see these appalling disparities, is to see generations of injustice carried forward as wealth, mostly in white hands, is transferred from one generation to the next.
This intergenerational transfer of wealth takes place over many years, including help in buying a first car, paying for college, or subsidizing the down payment on a first home. The apex of this transfer though is at the time of death, when the remainder of the parent’s wealth is usually transferred to the children or grandchildren.
Because the estate tax acts as a check to the concentration of wealth at the very top, it helps to even the economic playing field for each generation to follow. That is precisely why it is of critical importance not only to communities of color, but also to working class white communities
Obama’s decision to concede so much ground to Republicans on this issue is simply baffling. Further weakening of the estate tax is unacceptable. We should instead be finding ways to significantly strengthen it. It’s also clear that buckling on the estate tax, and the tax cuts for the wealthy more broadly, would be dangerous move for Democrats. Congressional Republicans will leverage the deficits created by this tax giveaway to millionaires and billionaires for massive cuts in social services and other public structures, on which all Americans depend.
In the days ahead, we must rally behind the House Democrats and the Congressional Black Caucus. Encourage them to stand strong and not back off their demands in those crucial negotiations. In the words of Frederick Douglas, "Power concedes nothing without a demand. It never did and it never will."
Ezra Klein: An estate tax primer
An estate tax primer
The
estate tax is going to dominate the final arguments over the tax deal,
so it's worth quickly running through what it is and how much the
various plans will cost us.
The basic insight behind the estate tax is that wealth concentration is a problem. That was true in 1916, when the tax was enacted, and it's true today, when it's being neutered. As Ray Madoff explains, the going theory came from Louis Brandeis, who said, “We can have concentrated wealth in the hands of a few or we can have democracy, but we can’t have both.” Andrew Carnegie himself testified in favor the estate tax's creation.
The way it works is simple enough. There's an exemption level beneath which estates are not taxed, and a tax rate that applies to every dollar the estate is worth above the exemption. In 2001, we had a $675,000 exemption and a 55 percent tax rate. So an estate worth $700,000 would take a 55 percent tax on that final $25,000. The estate tax's levels, however, have been changing because the Bush tax cuts -- as you can see in the table on the right -- have been phasing it out. In 2002, it was $1 million, and 50 percent. By 2009, the exemption was up to $3.5 million, and the rate down to 45 percent. And in 2010, the estate tax was repealed.
But not for long. If no action is taken, it returns in 2011 with an exemption of $1 million and a rate of 55 percent. If that seems like weird tax policy -- a single year in which death carried a huge tax break -- it is. But it was never about tax policy. It was a political strategy: Republicans wagered that Democrats wouldn't be able to bring the estate tax back after it had expired. Public opinion would be against them, and it would be backed by a massive amount of money from the nation's richest residents.
So far, it looks like they were right.
The dominant alternative to the estate tax's return -- which had support from both Republicans and, sadly, Democrats -- was the Lincoln-Kyl bill: A $5 million exemption with a 35 percent rate. This is the language that has been included in the tax deal.
So how much does this cost? With a $1 million exemption and a 55 percent rate -- in other words, what will happen if we do nothing -- the estate tax would raise about $700 billion over the next 10 years. The Lincoln-Kyl version would raise less than $300 billion. And the compromise most Democrats have coalesced around -- which was the 2009 level, with a $3.5 million exemption and a 45 percent rate -- would've brought in a bit less than $400 billion.
It's important to keep in mind the cramped space of this debate: If the tax goes back to its scheduled levels, it'll tax 2 percent of estates, If the Lincoln-Kyl levels are put in place, it'll tax 0.25 percent of estates. But the difference between the hundreds of billions the tax could raise and the miniscule number of estates it would affect explains the immense energy Republicans and some Democrats (notably Blanche Lincoln, who has traditionally raked in campaign money from the Walton family) give to the issue. In a report called "Spending Millions to Save Billions," Public Citizen and United for a Fair Economy estimated that a handful of the country's richest families had spent more than $400 million lobbying for the tax's repeal -- and of they were successful, they stood to save more than $70 billion. [emphasis added]
For the rich, fighting the estate tax is simple [sic] a good investment. And it looks like it's paying off.
Update: It's worth clarifying that the tax gets levied on the estate, not the heir. Technically, the heir pays nothing, and the tax needs to be dealt with before the estate is transferred.
Numbers and table credit: The Center on Budget and Policy Priorities.
Tax Deal Fight Now Focuses on House Challenge on Estate Tax
Sanders Filibuster Halted By Senate
Tax Deal Fight Now Focuses on House Challenge to Estate-Tax Exemption
By John Nichols
Posted on TheNation.com, December 14, 2010
In a display of how Washington insiders practice bipartisanship, most Senate Democrats voted with most Senate Republicans to deliver for the wealthiest Americans.
Senators from both parties, self-identified liberals and conservatives, united to end a filibuster by Vermont independent Bernie Sanders [1], who has led the fight to block an Obama administration deal with Congressional Republicans that extends tax breaks for billionaires and establishes estate-tax exemptions for millionaires.
Sanders conducted an eight-and-a-half-hour filibuster Friday, in which he outlined arguments against the agreement to trade a two-year extension of tax cuts for the wealthiest Americans, along with sweeping estate-tax exemptions, for a one-year extension of benefits for unemployed workers.
On Monday, Senate majority leader Harry Reid, D-Nevada, serving as floor manager for the deal cobbled together by the Obama administration and Senate minority leader Mitch McConnell, R-Kentucky, sought a cloture vote to end the filibuster and open debate on the plan.
Sixty votes were needed to end the filibuster. Reid secured an overwhelming eighty-three.
Most of the fifteen votes to support Sanders's filibuster came from Democrats. Senators Jeff Bingaman of New Mexico, Sherrod Brown of Ohio, Russ Feingold of Wisconsin, Kirsten Gillibrand of New York, Kay Hagan of North Carolina, Frank Lautenberg of New Jersey, Pat Leahy of Vermont, Carl Levin of Michigan and Mark Udall of Colorado voted with Sanders.
They were joined by five Republicans: Oklahoma's Tom Coburn, South Carolina's Jim DeMint, Alabama's Jeff Sessions, Nevada's John Ensign and Ohio's George Voinovich.
The lopsided vote provided an indication that the Senate is likely to approve the agreement.
Sanders remained defiant, however, signaling that approval will not come easily—or quietly. "It makes no sense to me to provide huge tax breaks for millionaires and billionaires while we drive up the national debt that our children and grandchildren will have to pay," the Vermonter said. "I further object strenuously to the lowering of rates on the estate tax, which only benefits the top 0.3 percent, the very, very wealthiest people in this country. I also am concerned about a significant precedent which diverts $112 billion in payroll taxes away from the Social Security trust fund. Our goal now must be to strengthen Social Security, not weaken it. Of course we must extend unemployment benefits and the tax breaks that the middle class desperately needs, but in my view we could have and should have negotiated a much stronger agreement."
The Senate vote may not come until Wednesday, and significant debate is expected before it comes.
While Sanders will be expressing broad opposition, there will also be attempts to amend the legislation. As of now, it is unclear whether amendments will be allowed. The White House is opposed at this point. However, Democratic and Republican senators have proposed amendments, with the most significant being a proposal by a group of Democratic senators to limit the extension of Bush-era tax breaks only to Americans earning less than $1 million a year.
One the Senate votes, action will move to the House, where the number-two Democrat, majority leader Steny Hoyer of Maryland, says "significant" amendments might yet be made.
"There certainly seems to me to be some room for a change which may or may not be perceived by some to be significant," said Hoyer.
Hoyer suggested Monday that House Democrats may push to limit exemptions for estates. As the agreement now stands, there's a a 35 percent estate tax with exemptions for the first $5 million for individual estates and the first $10 million for couples.
House Democrats have been advocating for a 45 percent tax exempting only the first $3.5 million of inherited estates.
United for a Fair Economy , which has noisily objected to the estate-tax deal, held out hope for the House to do the right thing.
"The Senate’s decision to approve the ill-conceived tax package negotiated between Obama and GOP leaders is shameful," said UFE executive director Brian Miller. "Fortunately, the buck does not stop in the Senate. We are calling on the House to fight back and win a better deal for the sake of middle- and working-class Americans—those who will be saddled with massive new debt to pay for wasteful tax breaks for millionaires and billionaires." (emphasis added)
If the two chambers pass different versions of the legislation, they will have to be reconciled in a House-Senate Conference Committee. Such a session would provide a last opportunity to alter the agreement between Obama and the Republicans.
Sanctimonious Commander-in-Brief
Sanctimonious Commander-in-Brief
By Jim Worth
Posted on The Huffington Post, December 12, 2010
The Tax Reform compromise may be President Obama's Swan Song.
The release of the compromised tax bill, negotiated between the Administration and Republicans, has resulted in acrimony between Obama and the congressional members of his party.
His uncharacteristic display of anger over his tax deal was misdirected at Democrats who feel the agreement struck between the President and the GOP is bad on several levels. His anger should have been leveled at the Republicans who shamelessly held crucial parts of the tax bill hostage.
He insists that this compromise is "a good deal for the American people."
Is it such a good deal; the only deal he could obtain?
It adds nearly a trillion dollars to the deficit over the next two years.
The President referred to Progressive Democrat's dissent as sanctimonious for not embracing the compromise. Sanctimony is defined as 'a show of being morally superior to other people.' But, when has doing the right thing for the American people become sanctimonious?
The President's "sanctimonious" admonition of Democrats who had expected more, should have been directed at the obstruction of the Republicans.
Freshly stung in the last election by unacceptable compromises from positions of strength, one would think that the President would have learned a lesson. His continued acquiescence, ie; giving up on the public option, not taking on the big banks, settling on a lesser amount for the needed stimulus, etc., played right into the Republican's hands and cost the Democrats greatly in both the House and the Senate.
Asking Democrats to concede their position of strength, is asking those still in Congress to put themselves in an intractable position for the 2012 elections.
There are compelling reasons to reject this compromised fiasco.
Yes, the President, in addition to the extension of the bottom four tax brackets, received some good things in the negotiations -- many of them necessary for the country's survival: a 13 month extension of unemployment benefits, earned income tax credit, child tax credit, and the payroll tax cut. These add to the deficit, but will do something to help the economy grow and those in need.
These are all programs the Republicans had to vote for, especially had the President backed them into a corner. They couldn't afford to let these benefits expire for the huge numbers of citizens in their states and districts who relied on them just to survive.
The other two concessions are seen as a gift to the obstructionist party. Extending the tax brackets for the wealthy and the changes to the estate tax are seen, flatly, as giveaways.
Ace Greenberg, on Squawk Box on Friday, stated, "I don't understand why my taxes didn't go up. A few percent is not going to change the way the uber-rich live."
Others have echoed the same sentiment. When the Republicans moved to eliminate the estate tax in 2003 Bill Gates Sr. and Chuck Collins adamantly opposed its elimination, advocating the wealthy giving back for the opportunities this country has afforded them.
Paul Newman, Annie Dillard, Ted Turner, and many others came forward in 2007 to oppose attempts to repeal or reduce the estate tax. One year ago, John Bogle, argued in a press call of United For a Fair Economy, for the preservation of the estate tax prior to the expiration in 2010 saying, "the wealthy owe a large part of their fortune to the country and its government," referring to the opportunities they have been given that helped them amass great wealth.
Read the full column by Jim Worth on HuffingtonPost.com
Democrats not pleased with deal on estate taxes
Democrats not pleased with deal on estate taxes
By Seth McLaughlin
Published in The Washington Times, December 12, 2010
Sen. Bernard Sanders' impassioned eight-hour speech Friday, slamming President Obama's tentative tax-cut deal with Republicans, directed some of his sharpest attacks at the plan's provisions to tax dead people's estates.
Armed with giant charts and statistics galore, the Vermont independent argued that wealthy individuals, including the heirs to the Wal-Mart fortune, are in a better position financially to shoulder more of the national debt and for that reason the estate tax should return to 2009 levels, or higher.
"99.7 percent of American families will not pay one nickel in an estate tax," he told the almost empty chamber. "This is not a tax on the rich. This is a tax on the very, very, very rich."
Though largely overshadowed by a White House press conference in which former President Bill Clinton endorsed the $858 billion deal, Mr. Sanders' oratorical marathon aired a frustration held by many Democrats who argue the level of the estate tax in the tax cut and unemployment insurance package let "the rich" off the hook.
"If someone leaves an estate of a billion dollars, under their proposal, they would gain $100 million over what the Democrats are proposing for the estate tax," Rep. Jan Schakowsky, Illinois Democrat, said on MSNBC's "The Rachel Maddow Show." "Imagine, Paris Hilton will be able to get an extra $100 million under their plan. It's obscene. It's absolutely an offense to us and to most Americans."
A levy on the transfers of big inheritances, the estate tax has become emblematic of philosophical differences that exist on Capitol Hill, where Mr. Sanders and other liberal-leaning lawmakers claim wealthy Americans simply can afford to contribute more to the national kitty and conservatives say the tax does not deliver the bang for the buck that Democrats claim and that the federal government shouldn't have a financial stake in how people pass along their personal fortunes.
Republicans repeated that message Sunday on the political talk shows.
"It's a double tax on death," said Rep. Paul D. Ryan, Wisconsin Republican and the incoming chairman of the House Budget Committee. "Economists will tell you that it's really not a tax that soaks the rich, but it's a tax on capital that deprives business investment there for job creation."
The first Bush cuts began phasing the estate tax out in 2001 from a top rate of 55 percent to 45 percent in 2009 and then to zero in 2010, with the per-person exemption also rising from $1 million to $3.5 million.
As a result, for the first time since the tax was enacted in 1916, transfers of large inheritances are currently free of paying the federal estate tax. In an odd twist of fate, that has led to stories where billionaires, including George Steinbrenner, former owner of the New York Yankees, are said to have saved their families hundreds of millions in taxes by dying this year.
Now with lawmakers scheduled to consider the tax compromise Monday, the estate tax is set to snap back to the pre-Bush administration levels of a 55 percent rate with a $1 million exemption for individuals at the end of the year. Under the deal brokered between Mr. Obama and Republicans, the rate is set at 35 percent with a $5 million exemption for individuals and $10 million exemption for couples.
Mr. Sanders and many Democrats are pushing for the 2009 levels or 2001 levels, while conservatives want a permanent repeal of the tax.
"We are outraged that estates are going to be taxed at 35 percent," said Bill Pascoe, president of Citizens for the Republic, a nonprofit conservative group. "This is a sucker bet for Republicans."
Mr. Pascoe warned that if Republicans vote for the plan, they will have ignored the anti-tax message from the November election, violated promises in the Pledge to America and put the White House in a win-win situation heading in to the 2012 election.
"If Congress accepts this deal, there are two likely scenarios," Mr. Pascoe said. "If the economy improves, Obama will take credit for it and campaign for re-election on it. If the economy worsens, Obama can blame the Republican tax cuts for failing to boost the economy."
Meanwhile, Americans for a Fair Estate Tax Coalition (AFET), a group of 69 organizations, including some of the nation's biggest labor unions, sent lawmakers a letter urging them to "re-establish a permanent, robust estate tax."
"In times of crisis, we pull together and share the sacrifice. While working- and middle-income people are struggling, this deal would gut the estate tax, putting billions more in the pockets of millionaires and billionaires," said Lee Farris, estate-tax policy coordinator of United for a Fair Economy and an AFET member.
Urge Speaker Pelosi to Fix the Estate Tax Now!
The Senate has enough votes to pass the weak Lincoln/Kyl estate tax as part of the overall Obama-GOP tax package. Our best hope for a stronger estate tax is in the House of Representatives. House leaders are developing their strategy now.
Let your representative and the House leadership know what you want.
MAKE THREE CALLS using our toll-free number to the Congressional switchboard at 800-830-5738:
- Call House Speaker Nancy Pelosi and urge her to organize a vote on amending the tax package to include a stronger estate tax at the 2009 level or better.
- Call House Majority Leader Steny Hoyer and demand the same of him.
- Call your own Representative and urge him/her to ask Speaker Pelosi and Rep. Hoyer to hold a vote on amending the tax package to include a stronger estate tax at the 2009 level or better.
Let’s flood their phones with calls! If the House fixes the bill to include a stronger estate tax, there’s still time for the Senate to pass the bill. (And if the switchboard is busy, here’s the direct line for Rep. Nancy Pelosi: 202-225-0100; for Rep. Steny Hoyer: 202-225-3130.)
Learn more about the federal estate tax. Also see UFE’s recent press releases and E-News stories on the estate tax.
Forward a link to this alert to friends, family and colleagues. Call and urge them to take action. And, help spread the word further by blogging about this important issue, and sharing this alert on your social networks.
Thanks for doing your part in the fight for tax justice!
Here are some encouraging quotes we've seen in the news over the past few days:
"[The estate tax cut] is rightly seen by the overwhelming majority of the Democratic caucus as egregious and unnecessary...Are Republicans really willing to hold up tax relief for millions of middle class Americans and others in order to provide a $25 billion hit to the deficit that benefits 6,600 estates at an average benefit of $1.8 million?”
- Rep. Chris Van Hollen (D-MD)
“Ninety-nine point seven percent of American families will not pay one nickel in an estate tax...This is not a tax on the rich. This is a tax on the very, very, very rich.”
- Rep. Bernie Sanders (I-VT)
"The people at the very, very top have made enormous gains...Now we're saying, you've ridden this huge wave of economic inequality and now we're going to let you pass even more of your wealth to your heirs without paying any taxes."
- Leonard E. Burman, tax policy expert at Syracuse University,
on the decades of wage stagnation for lower- and middle-income Americans.
Progressive Wealthy Getting Louder in Tax Compromise Debate
Obama-GOP Tax Cut Deal Riles 'Patriotic Millionaires'
Column appeared on ABCNews.com, December 11, 2010
Wealthy, business owners disappointed taxes may go down next year.
While the wealthiest taxpayers will gain financially if Republicans and the president successfully extend the Bush-era tax cuts in Congress, a group of millionaires and business owners said they will be disheartened if they pay less taxes next year. Members of the Patriotic Millionaires for Fiscal Strength, a group of 89 millionaires, petitioned President Obama to allow tax cuts on incomes greater than $1 million to expire at the end of the year, as scheduled. [...]
"I think it's a terrible deal for Democrats," said Guy Saperstein, founding member of the Patriotic Millionaires and a former civil rights attorney. "It's terrible on many levels but the most important one is the tax cuts for the rich."
Adding to the Budget Deficit
Saperstein said the tax cuts for the rich and the estate tax would have helped to lower the national debt instead of costing the government $700 billion or more over the next several years.
Saperstein also was disappointed by the reinstatement of the estate tax at 35 percent for two years starting next year with an exemption of $5 million of one's estate. If the tax breaks expire as scheduled at the end of this year, the estate tax would be 55 percent, with a $1 million exemption.
"It would benefit only the top less-than-1-percent, a huge benefit for them," said Saperstein. "I happen to be in that category, but it's still a bad deal for the public. If this deal goes down, the Republicans are going to demand that those deficits be corrected in some way. The public and working class people will end up paying for those deficits."[...]
Lee Farris, estate tax policy coordinator for the organizationUnited for a Fair Economy, said the tax proposal was "outrageous."
"The deal would make the estate tax even weaker than it was under President Bush, the weakest it's been in more than seven decades," said Farris, whose organization is comprised of business owners and farmers across the country.
Estate Tax Giveaway
Farris said the deal was "unacceptable" because it "gives away too much and gets too little in return," via the extension of unemployment benefits and low-income tax credits.
"The people who already have the most money have said, 'We're going to have a weaker estate tax or you can forget about unemployment.' And to me, that's an immoral position," said Farris. "They're saying that's more important than [helping] someone who has lost their job through no fault of their own."
Dave Eiffert, a small business owner who has worked with United for a Fair Economy, said he hoped for a higher estate tax ceiling and deeper tax cuts for the middle class instead of tax cuts for those making $200,000 and more.
Eiffert, co-owner of Snoqualmie Brewery in Snoqualmie, Wash., said he is below the $200,000 income level and is opposed to the notion that tax cuts to the wealthiest will trickle down to create jobs for others.
But Eiffert said it is not too late for the public to speak its mind on the various tax issues before the year comes to a close.
"I always hold out hope until it is a done deal," said Eiffert. "I urge people to contact their legislators and tell them what they want done. And I hope there will be something better than what has been proposed."
Read the full column on ABCNews.com.
Go Bernie
Somewhere into the seventh hour of his actual, old-fashioned, stand-up-and-talk-and-don't-yield-the-floor filibuster of the lousy Obama - GOP tax deal, Bernie Sanders made a passionate plea to supporters to let their Senators and Representative know that this is a bad deal. He is urging everybody to call Congress to tell them that we don't need more tax cuts for the wealthy. So are we! Do what Bernie says. Call now. Call often.
Estate Tax: Linchpin of the Tax Compromise Debate
Weak Estate Tax Could Derail Tax Deal
By Ashlea Ebeling
Posted on Forbes.com, December 10, 2010
Members of the fair tax movement are outraged at the generous estate tax provisions in the Obama/GOP tax deal and are calling on Congress to strengthen it so it hits more estates. Rather than reinstating the estate tax at 2009 levels (a 45% top rate and $3.5 million per person exemption) as was expected, the deal sets the top rate at 35% and raises the exemption to $5 million. So a couple could leave $10 million to heirs without worrying about the federal estate tax.
“It’s obscene and unnecessary, and it benefits no one but a handful of heirs of rich parents,” stated Mike Lapham, director for United for A Fair Economy’s Responsible Wealth project, in a release today calling for stronger tax provisions in the deal, and applauding House Democrats for their commitment to strengthening the plan. “The estate tax is reason enough to reject the deal,” Lapham said.
Responsible Wealth has been fighting for a fair estate tax for 10 years, ever since the Bush tax cuts started gradually weakening the tax, ending with repeal for 2010. (If Congress does nothing, the estate tax is set to return on Jan. 1 with a $1 million per person exemption and rates of up to 60%.) High-profile signers of Responsible Wealth’s “call to preserve the estate tax” include Forbes 400 members David E. Shaw, Julian Robertson, Jr., George Soros, John Sperling, and Ted Turner. All six children of David Rockefeller, the oldest Forbes 400 member, have signed too.
Last month Responsible Wealth gathered millionaire and multi-millionaire signers of the call who are small business owners and entrepreneurs to speak out on why they support a strong estate tax. [...]
Read the full post on Forbes.com.
Five Reasons Why the Obama-GOP Deal Sucks
Earlier this week, President Obama struck a deal with elitist Congressional Republicans, a deal that he claims is "doing what's right for the American people, for jobs and for economic growth."
The reality is that the deal does more for Paris Hilton than it does the 100,000 people who work at Hilton hotels.
The Obama-GOP plan sucks because it doesn’t do anything to close the wealth divide that has been growing steadily for decades. Closing this gap by allowing the Bush tax cuts to expire and restoring the estate tax was a top priority for progressives during the 2008 election. We expected bold, decisive action. Needless to say, we're a little pissed off.
Compromise usually means that both sides give up a little something to reach an agreement that we can all live with. The problem is, all the Republicans wanted out of a deal with Obama was to preserve tax cuts for the wealthy. And they got it.
Of course, not everything in the deal sucks. Extension of the Bush tax cuts for the middle class is good, as well as the tax credits. And there’s little question that reprieve was essential for the millions of out-of-work Americans. But to settle for a deal that provides a huge tax break for millionaires and billionaires is wildly irresponsible and undeniably unfair. Not to mention sucky.
The deal sucks. And – in plain English – here’s why:
1. It holds unemployed Americans hostage.
It sounds like a nightmare: either watch unemployment benefits for out of work Americans expire or let Wall Street fat cats walk away -- scot-free -- from paying their fair share of taxes. This plan sucks because it wrongly turns this compromise into a black/white, either/or decision. It draws a line in the sand, attempting to divide the left at a time when we should be pulling together.
Besides, I thought we weren’t supposed to negotiate with hostage-takers?
2. It increases economic inequality.
It’s a frightening reality: the top one percent of Americans own as much wealth as those in the bottom 90 percent (to be clear, by “top” and “bottom” we’re only talking net worth). If you think it’s completely unacceptable that billionaire Warren Buffet’s secretary pays more in taxes a higher tax rate than the man himself (as he famously pointed out), know that this plan will do nothing to change that. And that sucks.
The wealthy in this country are doing fine. Why aren’t they being asked to make sacrifices like the rest of us?
3. It values whack economic principles.
The number one economic justification for tax breaks for the rich is that they will somehow trickle down these savings into jobs to provide economic stimulus. Yet, history tells us that this simply isn’t true. If tax breaks for the rich resulted in job creation, we wouldn’t be in the mess we’re in a decade after the Bush tax cuts. History tells us that tax breaks for the rich sit idle in their bank accounts.
Consider a very sophisticated and economically nuanced piece of economic insight: people need money to buy stuff. If we want to stimulate the economy, we need to be looking at how we can put regular people back to work. That seems to be the most surefire plan for economic stimulus out there.
4. It’s more of the same.
Extending Bush tax cuts for the wealthy and weakening the estate tax is bad policy, bad economics, and bad for our country. During challenging times, we should be investing in our people, our education, and our national infrastructure. Instead, we are prioritizing the bank accounts of millionaires and billionaires.
This tax deal does nothing to move us forward and simply provides more of the same, setting us up for a painful bout of economic déjà vu in a year or so.
5. It disrespects the will of the people.
Obama may chide us for being progressive “purists”, but I prefer to think of those who are skeptical of this plan as progressive patriots. It is our job to hold our elected officials accountable. Polling shows that the majority of Americans believe that tax breaks for the super-wealthy should be allowed to expire. After all, low- and middle-income Americans have tightened their belts, why aren’t we asking the same of millionaires and billionaires?
This deal sucks. It sucks real bad. It’s time we rise up, make lots of noise, and hold our elected officials accountable. We must call on our elected officials and tell them that the deal sucks, and we expect more. Whose back do they have, anyway?
Americans For a Fair Estate Tax Coalition Letter to Congress - December 2010
December 8, 2010
Dear Senators and Representatives:
The undersigned organizations urge you to establish a robust estate tax during the current lame duck session of Congress. Within the next few weeks, the House will likely consider an extension of the Bush tax cuts; any package must include the permanent extension of a strong estate tax.
Americans for a Fair Estate Tax (AFET), a coalition of dozens of national and state organizations, has long advocated for a robust estate tax that can provide our nation with the desperately needed revenue to invest in priorities such as education, health and nutrition, and infrastructure.
We are told repeatedly, however, that increased investments in the American people are not affordable because the federal budget deficit is too great. Yet, Congress has sharply decreased an important revenue source that can help fund these priorities and reduce the budget deficit.
The Bush tax cuts enacted in 2001 set in place the gradual reduction and then temporary one-year elimination of the federal estate tax for 2010. Unfortunately, we have already seen the revenue loss resulting from the one-year repeal. In March, an oil and gas businessman in Texas became the first billionaire in United States history to pass along his entire estate – worth some $9 billion – without paying any federal estate tax.
President Obama recently endorsed a Bush tax cut extension compromise with Republicans that includes a weak estate tax. With a $5 million exemption for individuals and a $10 million exemption for couples, and a tax rate of 35 percent, this proposal would severely undermine this fair and important revenue source.
The president originally proposed permanently extending the 2009 estate tax in his budget proposal this year. With a $3.5 million exemption for individuals and a $7 million exemption for couples, and a tax rate of 45 percent, this proposal would be more than generous to the wealthiest among us and would not harm small businesses or family farms.
Restoring the estate tax to 2009 levels or stronger would affect only the wealthiest one quarter of one percent of estates and would bring in roughly $250 billion in revenue over 10 years. The Brookings/Urban Institute Tax Policy Center estimates that in 2009, only 100 small businesses and small farm estates nationwide owed any estate tax, and those paid an average tax of only 14 percent.
Any proposal that grants a higher exemption level or a lower tax rate than existed in 2009 will virtually eliminate the estate tax and cost our nation much more revenue down the road. Moreover, no proposal should provide a prepayment option or include an unlimited farm exemption, both of which would provide an unacceptable loophole and deprive the Treasury of much-needed federal revenue.
We support re-establishing a permanent robust estate tax because it serves these crucial purposes:
- The estate tax raises revenue that our nation needs to invest in the American people. Continued repeal will deepen the budget deficit by roughly $800 billion between 2012 and 2021.
- Polls show a clear majority of voters want there to be an estate tax, believing that an exemption of between $2 million and $3.5 million is fair. Voters continually place the estate tax at the bottom of the list of taxes the government should cut.
- Because the government does not tax assets bequeathed to a charity, the estate tax encourages charitable contributions. This is especially important in light of the current economic downturn in which charities are struggling to continue providing vital community services.
- The estate tax functions as a backstop for the income tax, taxing capital gains that previously have not been taxed. Over half the value of inherited estates is capital gains income that has never been taxed. Most large estates include assets such as real estate, stocks or bonds. Any increase in the value of these assets is capital gain income that would only be subject to the income tax if the assets were sold during the owner’s lifetime.
A robust estate tax must fairly tax wealth that might otherwise escape taxation entirely, preserve a system that ensures that the very wealthy pay their fair share, and maintain a structure that encourages charitable giving.
Sincerely,
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This Is What's Wrong with the Tax Cut Deal
President Obama is still pushing his tax cut deal with the GOP. The Senate has already taken up debate. They even added some "sweeteners" to coax votes out of some reluctant Democrats. What they don't realize is that things like "the continuation of a federal tax break for mass transit users, an ethanol tax credit and a grant program for renewable energy developers" are not what is needed to make this a sweet deal. The problem with this deal is demonstrated clearly in this chart (via Ezra Klein.
The deal that Administration officials negotiated gives an bigger tax break to millionaires and the richest taxpayers than even the original Republican proposal. That is why we are opposed to the deal and why Democrats in the House are right to not bring it to a vote as is. It isn't because it lacks dubious sweeteners like more ethanol subsidies. It will be a bad deal until the giveaway to the rich – who least need a tax break – is scaled back.