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An Embarrassment of Riches

The estate tax affects only the richest 2 percent of Americans. But Congress wants to repeal it to make sure its "base" doesn't pay another penny.
 
 
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We have a new caucus on Capitol Hill: the chazer caucus. For those of you who might not be hip, chazer is the Yiddish word for pig. As in, "Gee, that person has so much [fill in the blank], to grab for more is just being a chazer ."

Which brings me to a lead footsoldier in the chazer caucus, Republican Sen. Jon Kyl. Right after Labor Day, Kyl will attempt to bring to a vote a bill that would repeal the estate tax. When some really rich person croaks, their assets get transferred to their heirs, who, God forbid, have to pay taxes when the estate gets to a certain level.

The chazer caucus has been brilliant in framing the estate tax as a "death tax" hurting poor family farmers. But that turns out to be nonsense. As the good folks from OMB Watch point out, "An incredibly tiny number of family farms are actually impacted by the estate tax." A new report from the nonpartisan Congressional Budget Office found that "if the current exemption level of $1.5 million per individual ($3 million for a couple) were in effect in 2000, then only 300 family farms would have had to pay any estate taxes. The report further estimates the number of family farms impacted would have dropped to a mere 65 farms nationwide with an exemption of $3.5 million ($7 million per couple), the level the exemption will be in 2009."

This tax hits only the wealthiest 2 percent of Americans. The Coalition for America's Priorities underscores the fact that this tax hits a tiny portion of the population: "In 2001, over half of all estate taxes were paid by 3,502 people with estates larger than $5 million -- representing the top 0.14 percent of all Americans."

The estate tax stayed largely unchanged until 2001, when the current president took office. What's truly amazing is that the estate tax is supposed to disappear by 2010, and then be reinstated in 2011 -- as one of the gimmicks that was part of the Bush tax cuts.

And what's the cost of giving the richest Americans more cash? In the first 10 years, the U.S. Treasury will lose between $750 billion and one trillion dollars, forcing more cuts in education, Medicare and other key social programs -- not to mention piling on more debt for future generations. This is an unconscionable raid on the public treasury by people already benefiting from the Bush tax cuts.

It shows what a pickle we are in that the forces of light who are fighting complete repeal are suggesting one possible compromise. Instead of completely eliminating the estate tax, the compromise deal would raise the exempted estate tax to $3.5 million and $7 million for couples. But why compromise? Why shouldn't people sitting on several millions dollars be forced to pay the current tax on estates? One thing that we forget in the debate over taxes is that the wealth of the richest in our society is not a natural phenomena or due to pure skill -- society makes multi-billion dollar public investments in areas such as infrastructure and education that make it possible for the rich to pile up their wealth. Think of taxing estates as simply a modest payback for public services rendered -- the reason most people pay taxes on their paychecks.

The Republicans will probably hold all 55 of their chazer caucus supporters in line by simply demanding party loyalty, though there are some attempts being made to lean on John McCain, George Voinovich (Ohio), Lincoln Chafee (Rhode Island), Susan Collins (Maine), and Olympia Snowe (Maine) to buck Majority leader Bill Frist by arguing the fiscal insanity of letting millionaires get away with more money from the U.S. Treasury at a time of record deficits.

It's pretty certain that the Republicans also have three Democrats: Blanche Lincoln (Arkansas) and the Nelson boys. Bill Nelson (Florida) signed on as a co-sponsor of Sen. Jon Kyl's repeal bill; Lincoln has long been for full repeal and her pet policy is unlimited exemptions for farms and business, which is awful tax policy. Ben Nelson (Nebraska) gives as his excuse that he has a tough re-election next year -- but he's been off the reservation for a long time. So Frist already has 58 votes to end debate and crush a filibuster -- just two votes shy.

The other Democrats who apparently are most ripe to topple are: California's Dianne Feinstein, who is personally rich, so I guess this is her looking after her heirs; Mark Pryor, who sees this as a way to suck up to his home-state Arkansas Wal-Mart heirs; Evan Bayh, who has to court financial contributors for his presidential run; and Mary Landrieu, who won a close re-election in Louisiana thanks to the low-income black voters who will take the biggest hit from the repeal. By the way, Landrieu, Bayh and Pryor all voted for the bankruptcy bill earlier this year -- yet another bill that hurt average working families but helps the well-connected and powerful (in this case, the credit card industry).

What's striking to me is the complete inability of the Democratic side (read: Harry Reid) to demand party loyalty on this crucial issue and call for a solid vote against the repeal and for sustaining the filibuster. And if morality isn't enough of an argument, those considering joining the chazer caucus can seek solace in the public polls showing a majority of people against full repeal.

If Kyl can't get his full repeal past a filibuster, he's going to try another maneuver: a "compromise" bill, which would make permanent the exemption at $5 or $10 million but also drop the tax rate for the estates that have to pay to an effective rate of 6 percent -- similar to a sales tax. This is a back-door repeal because it would cost up to 93 percent of the full repeal proposal.

U.S. Action did an amazing chart, which shows us this: If the repeal passed, the $45 billion going back to the richest people in the country could provide health insurance for more than 22 million children. So there's the choice: more money for rich people or health coverage for children. To all the masses of people of faith, including those sanctimonious chazer caucus senators like Rick Santorum and Bill First, I ask: Wonder what Jesus would say on that?

Jonathan Tasini is president of the Economic Future Group. His blog Working Life chronicles the labor movement and other issues affecting American workers.