A couple of promising developments occurred on the estate tax front yesterday. The Senate soundly defeated (59-39) an effort by Sen. Jim DeMint (R-SC) to repeal the tax permanently. (It expired at the end of 2009 but is scheduled to return in much larger form next year when the 2001 tax cut expires.) And at a teleconference sponsored by United for a Fair Economy, former Treasury Secretary Robert Rubin called on Congress to reinstate a robust estate tax.
As the debate over the tax’s future continues, here are a few points to keep in mind:
- Permanent repeal would cost $571 billion over the next ten years — and would increase the deficit by $698 billion over that period (once the increased interest payments on the debt are counted) if policymakers didn’t offset the cost. Over the long term, permanent repeal would greatly worsen the nation’s already severe budget problems.
- Continuing the estate tax at its 2009 level, as President Obama has proposed, would cost $253 billion over the next decade compared to letting the tax return in its larger, pre-2001 tax cut form. A recent proposal to cut the estate tax below its 2009 level would cost at least $60 billion above that — and likely much more in the long run, since the proposal would phase in slowly over the first decade.
- Cutting the estate tax below its 2009 level would benefit only the wealthiest 1 in 400 estates in the country, since only they owe any estate tax under the 2009 rules.
Given our fiscal situation, preventing repeal isn’t nearly enough. At a minimum, Congress should not weaken the estate tax beyond its 2009 level.