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.