August 11th, 2011 WASHINGTON, DC
On the eve of the Ames Straw Poll, nearly all of the 2012 Republican Presidential candidates have signed a pledge endorsing permanent repeal of the Federal Estate Tax, the American Family Business Institute (AFBI) announced today. The tax is currently set at 35 percent on all assets above $5 million and will increase to 55 percent on everything above $1 million starting January 1, 2013, making the future of the death tax an important issue during the current campaign season. “Ten of the 12 leading Republican Presidential candidates agree: the rate ought to be zero. Permanently,” said AFBI President Dick Patten. The pledge, organized by AFBI, has been signed by (in alphabetical order): Michele Bachmann; Herman Cain; Newt Gingrich; Gary Johnson; Thaddeus McCotter; Ron Paul; Tim Pawlenty; Rick Perry (poised to enter the race in coming days); Mitt Romney and Rick Santorum. Both Charles Roemer and Jon Huntsman have declined to sign the pledge (both decline all pledges). President Obama continues to support a permanent death tax of 45 percent. “The candidates who support repeal get it: Taxing Americans at death is the wrong policy to push when the country is in dire need of new jobs, which are created by the small and family businesses that are most susceptible to the death tax,” said Patten. “Repealing the death tax is the common sense policy for serious candidates.” For a complete list of Death Tax Repeal Pledge signers, visit: http://www.nodeathtax.org/deathtax/currentfight/2012-republican-presidential-candidates
By Paul Kane and Lori Montgomery, Published: Washington Post July 9, 2011
House Speaker John A. Boehner abandoned efforts Saturday night to cut a far-reaching debt-reduction deal, telling President Obama that a more modest package offers the only politically realistic path to avoiding a default on the mounting national debt. On the eve of a critical White House summit on the debt issue, Boehner (R-Ohio) told Obama that their plan to “go big,” in the speaker’s words, and forge a compromise that would save more than $4 trillion over the next decade, was crumbling under Obama’s insistence on significant new tax revenue.
“Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes,” Boehner said in a statement released less than 24 hours before the White House meeting was scheduled to begin. “I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”
Boehner’s decision leaves negotiators reexamining a less-ambitious framework — aimed at saving roughly $2.4 trillion over the next decade — that had been under discussion between Vice President Biden and a bipartisan group of lawmakers. But that framework is hardly complete; the group broke up last month when Republicans walked out over the tax issue. The sweeping deal Obama and Boehner had been discussing would have required both parties to take a bold leap into the political abyss.
Democrats were demanding more than $800 billion in new tax revenue, causing heartburn among the hard-line fiscal conservatives who dominate the House Republican caucus. Republicans, meanwhile, were demanding sharp cuts to Medicare and Social Security, popular safety net programs that congressional Democrats have vowed to protect. Obama, at least, was willing to make that leap and had put significant reductions to entitlement programs on the table.
But on Saturday, Boehner blinked: Republican aides said he could not, in the end, reach agreement with the White House on a strategy to permit the Bush-era tax cuts for the nation’s wealthiest households to expire next year, as lawmakers undertook a thorough rewrite of the tax code. Democrats quickly accused Boehner of placing tax breaks for the rich above the nation’s financial salvation. “We cannot ask the middle-class and seniors to bear all the burden of higher costs and budget cuts. We need a balanced approach that asks the very wealthiest and special interests to pay their fair share as well, and we believe the American people agree,”
White House communications director Dan Pfeiffer said in a statement. “Both parties have made real progress thus far, and to back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington.” The Sunday meeting at the White House will go on as scheduled, and Pfeiffer said Obama will continue to press for a broad deal aimed at stabilizing the soaring national debt. Without such a plan, lawmakers in both parties have said they will not vote to grant the U.S. Treasury additional borrowing authority. Unless Congress acts to raise the $14.3 trillion legal limit on the debt, Treasury Secretary Timothy Geithner has said that the government will begin to default on its obligations after Aug. 2.
The Biden framework, which he crafted with key Republicans, including House Majority Leader Eric I. Cantor (R-Va.), includes cuts to federal agency budgets and more modest changes to government health programs. It would not tackle the rising cost of Social Security. Negotiators had managed to reach tentative agreement on only about $1.5 trillion in savings, according to aides in both parties — short of the $2.4 trillion Boehner is demanding in exchange for an increase in the debt ceiling that would pay the nation’s bills through spring 2013.
Ironically, it was Boehner who cajoled Obama into pushing for the big deal. His Saturday night announcement capped a whirlwind courtship between the two men, beginning with a casual round of golf at Andrews Air Force Base on June 18. A series of secret meetings followed, culminating in a decision to push for a landmark debt-reduction deal. Both leaders believed that divided government — with Republicans in charge of the House and Democrats holding the Senate and the presidency — might provide an opportunity to demonstrate that bipartisan cooperation was still possible on a grand scale.
A deal to slice more than $4 trillion in borrowing over 10 years would be, by far, the largest debt-reduction package in at least two decades. The plan would have struck at all the major drivers of government spending, from Social Security and Medicare to the Pentagon. The emerging deal, however, quickly appeared to be collapsing under its own ideological weight. Liberals were outraged by Obama’s offer to rein in entitlement spending, particularly Social Security, which congressional Democrats believed would not be a part of the debt-reduction effort. The White House had offered to change the measure of inflation used to calculate Social Security payouts, a shift that could save more than $100 billion over the next decade, according to congressional budget analysts.
Conservatives, meanwhile, were uniformly opposed to raising taxes. That resistance has proved to be the biggest obstacle to a compromise of any size. In private negotiations with the White House last week, Boehner dangled a tax deal that he thought might bridge the divide. Republicans would immediately extend the Bush tax cuts for middle-class households, leaving the cuts that benefit the nation’s wealthiest taxpayers on track to expire next year.
That would have been a huge win for Democrats, whose liberal base views ending tax cuts for the rich as a top priority — and one that Obama has failed to deliver. Democrats, in turn, would agree to a rewrite of the tax code by the end of the year, to lower rates for everyone, a top GOP priority. As recently as Friday, the speaker’s office and the White House were trading proposals, trying to reach agreement before the Sunday meeting with other top congressional leaders.
People in both parties said talks broke down over tax reform: On Friday, the White House said changes in tax law must not shift the tax burden more heavily onto households earning less than $250,000 a year. After that, suddenly things went dark, said an administration official, speaking on the condition of anonymity to discuss private negotiations. Some Republican aides said the deal was simply not good enough, in part because Obama refused to cut entitlement programs deeply enough to restore them to solvency. They also complained that, as part of a mechanism to force lawmakers to overhaul the tax code, the president wanted a trigger that would automatically raise taxes if tax legislation was not enacted by the end of this year.
But other Republicans said Boehner had finally realized that he could not sell the tax framework within his party. Many House Republicans, particularly the influential 87-member freshman class, won elections vowing to never raise taxes. At a Thursday meeting at the White House, Cantor said the tax package could not pass the House. And at a Friday morning news conference, every member of Boehner’s leadership team denounced the idea of including tax increases in the debt legislation.
Meanwhile, Republican presidential candidates have been putting additional pressure on Boehner. Rep. Michelle Bachmann (R-Minn.) vowed in her first campaign ad to never vote for any debt-ceiling increase, no matter what provisions were attached to it. On Saturday, top Republicans offered tepid support for Boehner’s decision.
Don Stewart, spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), said McConnell, too, “remains concerned with the Democrats’ unwillingness to take steps to protect entitlement programs from bankruptcy.” Cantor spokesman Brad Dayspring said in a statement: “The tax increases that the Democrats are insisting upon cannot pass the House and are the last thing Congress should do with so many people out of work.
Eric has always believed the Biden group identified between $2 and $2.5 trillion in spending cuts that could represent the framework for an agreement.” Boehner’s announcement makes the Sunday evening White House summit all the more critical, as Obama, Biden and congressional leaders must quickly formulate a new plan for avoiding default. Senate Majority Leader Harry Reid (D-Nev.) has said a deal must be sealed by the end of this week to leave sufficient time for Congress to pass it. Though widely hailed as extremely productive, the Biden group also encountered major obstacles.
The Biden package so far involves more than $1 trillion in cuts to government agencies, about $200 billion in reductions to Medicare and Medicare, and another $200 billion from other direct-payment programs, such as farm subsidies and federal employee pensions. It would not touch Social Security, in deference to Democratic demands. The Biden negotiators were stymied, however, over the issue of revenue. Obama had proposed an increase of more than $400 billion, including new limits on deductions for the wealthy and elimination of a raft of corporate tax breaks benefiting hedge fund managers and corporate jet owners, among others. Cantor and other Republicans refused to consider closing any tax breaks unless they were offset by tax cuts elsewhere. The group was also fighting over Democratic demands for a “firewall” between domestic and military spending that would guarantee that the Pentagon absorbed its share of the fiscal pain.
On March 30, H.R. 1259, “The Bipartisan Death Tax Repeal Permanency Act,” was introduced in the U.S. House of Representatives by Rep. Kevin Brady (R – TX). At a press conference, Brady stated, “The death tax is still the number one reason family farms and businesses in America aren’t passed down to the next generation. It’s the wrong tax at the wrong time and it hurts the wrong people.”
The bill is called “bipartisan” because it currently has six co-sponsors, two Democrats and four Republicans: Rep. Dan Boren (D – OK), Rep. Lynn Jenkins (R – KS), Rep. Walter Jones (R – NC), Rep. Kristi Noem (R – SD), Rep. Devin Nunes (R -CA), and Rep. Mike Ross (D – AR).
The bill, which would become effective on the date of enactment, provides for the following:
According to Rep. Brady, while he believes that there will be strong support for H.R. 1259 in the House, he sees a fight in the Senate. Nonetheless, Brady wants to push for a debate over the future of the federal estate tax sooner rather than later: “I can tell from having almost let the clock run out last Christmas time that there were real problems created by the lateness of Congress to act on this issue. [You think?!] So we are going to encourage both the House and Senate to move as quickly as possible on this to create that certainty for farmers and businesses.”
As usual I won’t be holding my breath, although I still think that the federal estate tax will be repealed for 2013 and beyond even though the results of my latest estate tax straw poll show that the majority of voters disagree with me: New Estate Tax Straw Poll – Cast Your Vote! – What Do You Think Congress Will Do With Estate Taxes for 2013 and Beyond?
FY 2010 Budget Resolution (Conference Report to Accompany S. Con. Res. 13) passed the House 233-193 and the Senate 53-43 on April 29, 2009. The budget assumes a freeze of the estate tax at the current 45% rate and $3.5 million exemption.
Lincoln/Kyl Compromise, offered as an amendment (SA 873) to the Senate Budget Resolution (S. Con. Res. 13), was agreed to by a vote of 51-48 on April 2, 2009 and later dropped in conference committee. All 41 Republicans and 10 Democrats voted YES, including Senators Blanche Lincoln (AR), David Pryor (AR), Bill Nelson (FL), Evan Bayh (IN), Mary Landrieu (LA), Max Baucus (MT), Jon Tester (MT), Ben Nelson (NE), Maria Cantwell (WA) and Patty Murray (WA). The amendment would have created a deficit neutral reserve fund to make the estate tax permanent by lowering the rate to 35%, increasing the exemption to $5 million indexed for inflation, reunifying estate and gift taxes and providing for spousal portability. The proposal would not have included deductibility for state estate taxes. PATG supported this amendment.
Durbin Amendment (SA 974), offered to the Senate Budget Resolution (S. Con. Res. 13) immediately following the Lincoln/Kyl Compromise, was agreed to by a vote of 56-43 and later dropped in conference committee. All 41 Republicans and 2 Democrats voted NO, including Senators Bill Nelson (FL) and Mary Landrieu (LA). The amendment would have raised a point of order against any estate tax relief better than a freeze of current law unless an equal amount of tax relief was also provided for individuals earning less than $100,000 per year. PATG opposed this amendment.
Representative John Salazar’s (D-CO) H.R. 173 would exclude from the gross estate of a decedent the value of farmland used by an heir for farming purposes.
Representative Mac Thornberry’s (R-TX) H.R. 205 would repeal federal estate and gift taxes.
Representative Earl Pomeroy’s (D-ND) H.R. 436 would make the estate tax permanent by freezing the rate at 45% and exemption at $3.5 million, apply a 5% surtax to estates over $10 million and disallow valuation discounts for certain family-owned entities. PATG opposes this legislation.
Representative Harry Mitchell’s (D-AZ) H.R. 498 would reduce the estate tax rate to 15% for estates under $25 million and 30% for estates over $25 million, phase in a $5 million exemption indexed for inflation, reunify estate and gift taxes, provide for spousal portability and eliminate the state estate tax deduction.
Representative Jim McDermott’s (D-WA) H.R. 2023 would make the estate tax rate permanent at 45% for estates up to $5 million, 50% for estates over $5 million and 55% for estates over $10 million and reduce the exemption to $2 million indexed for inflation. PATG opposes this legislation.
Representative Kevin Brady’s (R-TX) H.R. 3463 would permanently repeal the estate tax. PATG supports this legislation.
Representative Mike Thompson’s (D-CA) H.R. 3524, introduced with Representative John Salazar (D-CO) would exclude certain farmland, which is in continuous use for agriculture or horticulture, from the value of estates.
Representative Shelley Berkley’s (D-NV) H.R. 3905, introduced with Representatives Kevin Brady (R-TX), Artur Davis (D-AL) and Devin Nunes (R-CA), would, over ten years, permanently lower the estate tax rate to 35%, increase the exemption to $5 million indexed for inflation and eliminate the state estate tax deduction. PATG supports this legislation.
Senator Max Baucus’s (D-MT) S. 722 would make the estate tax permanent at a 45% rate and $3.5 million exemption indexed for inflation, reunify estate, gift and generation-skipping taxes, provide spousal portability, improve special use valuations and retain stepped-up basis and deductibility of state estate taxes.
Unfortunately, Ben Franklin was right when he said there are only two things certain in life: death and taxes. When the lame-duck General Assembly forced through a massive increase in state income taxes in January, making it a lot more expensive to live and work in Illinois, they also reinstated the state’s estate tax, which now makes it more expensive to die in Illinois as well. I am working to change that.
My Senate Bill 1767 will repeal Illinois’ estate tax. We all recognize Illinois’ dire fiscal condition and the need to finally come to grips with our out-of-balance budget, but siphoning more money from families and businesses is not the solution. A tax on dying in Illinois will be especially onerous for small-business owners and family farmers, who could be faced with the prospect of selling their businesses and farms to pay the tax collector.
How did we get here? On Jan. 12, in the waning hours of the 96th General Assembly, Democrat leaders hiked the state’s personal income tax rate by 67 percent and the corporate income tax rate by 46 percent. The legislation was approved without the support of Republicans in the Senate and House, and Governor Pat Quinn signed the measure into law the following day. The same legislation also reinstated the Illinois estate tax for the estates of persons who die in 2011 and thereafter, once again linking death and taxes in Illinois. Only 17 states impose their own estate taxes. Illinois imposes an estate tax on estates valued at more than $2 million. The applicable rate depends on the size of the estate and increases with the size of the estate, starting at 8 percent and going as high as 16 percent, on top of the federal 35 percent estate tax rate.
Until 2005, the amount of the Illinois estate tax could be taken as a full credit against the federal estate tax liability. In 2005, that was changed at the federal level to a deduction from the taxable estate for the calculation of the federal estate tax liability. This change necessitates a complicated back-and-forth calculation before final tax liabilities are settled. Estate taxes this high are burdensome. People are forced to give away assets to family members or charities, thus reducing the value of the estates and subsequent tax liabilities, or to establish residency in another state that doesn’t have this kind of tax burden. A massive tax hike and the reinstatement of the state estate tax will have a devastating effect on Illinois families and employers who have been cutting their budgets and struggling to make ends meet. Repeal of the estate tax may not happen this year, but it needs to happen. We are already taxed on our income, property and purchases. Illinoisans should not be taxed on dying here, too. — Bill Brady, State Senator, 44th District. http://articles.chicagotribune.com/2011-04-26/news/chi-110426brady_briefs_1_estate-tax-taxable-estate-tax-rate
By William Beach
WebMemo #2688 Policymakers should do what their voters want them to do, as revealed in poll after poll: They should repeal this tax and kill it, once and forever. Punishing Hard Work Americans of all walks of life sense the deep injustice of federal death taxes and the fundamental immorality of bedrock public policies that tell people one thing and do another. Policymakers say, on the one hand, that that if you work hard, save your money, and generally do the right things in your daily life, you will succeed in the U.S. economy. On the other hand, however, these same policymakers support the federal death tax, which has the power to nearly confiscate these hard won economic gains once success is attained. As Members of Congress consider whether to retain federal death taxes, they should ponder the principal reasons why they should join prior Congresses and repeal this tax. Death taxes discourage savings and investment. For those Americans who think that their estates may one day pay federal death taxes, the tax sends a signal that it is better to consume today than invest and make more money in the future. Instead of putting their money in the hands of entrepreneurs or investing more in their own economic endeavors, Americans are encouraged to consume it now rather than pay taxes on it later.
[1] Death taxes undermine job creation. Not only do federal death taxes have a corrosive effect on the virtue of savings and prudent investment, but they also directly undermine job creation and wage growth. These latter effects make death tax repeal everyone’s concern. Heritage Foundation economists estimate that the federal estate tax alone is responsible for the loss of between 170,000 and 250,000 potential jobs each year.
[2] These numbers do not appear in employment statistics because the investments that would have created these jobs are never made.
[3] Death taxes suppress productivity and wage growth.
[4] The estate tax discourages investment, which holds down wage growth. Businesses are less able to purchase new tools and equipment, which makes workers less productive, which means less wage and salary growth. It is through productivity growth that enhancements to economic and social well-being are made and the virtues of America’s form of economic organization are most abundantly seen.
[5] Death taxes contradict the central promise of American life: wealth creation. Most Americans oppose death taxes because they seem so un-American. The central promise of American life is that if you work hard, save, and live prudently, you will be assured the enjoyment of your economically virtuous life. There are few other places on the planet where this promise is made (let alone kept), and it–along with companion promises of political and religious freedom–has attracted millions of immigrants to the United States.
[6] The death tax contradicts the very promise that has attracted so many. Death taxes hurt those who have tied their savings up in land. Some Americans–such as farmers, ranchers, and homeowners–have improved the land upon which their other assets sit, and the death tax punishes them for this productivity. Others see their property value go up because of factors beyond their control, such as the population growth of cities.
[7] The death tax is fundamentally unfair. Death taxes hurt African-American business owners. Many Americans save in their businesses in order to pass an asset along to their children, and many of these businesses are owned by African-Americans and other minorities. The threat of seeing their life savings absorbed in a single tax bill is reason enough to demand permanent repeal. Death taxes hurt women business owners. Small businesses offer a way around the corporate glass ceiling for many women returning to the labor force after raising families or taking care of other obligations. The economy welcomes their enterprise and creativity, but the death tax makes their return more difficult. The Nightmare of the American Dream
The federal death tax is, indeed, the nightmare of the American dream. Not only does it undermine the promise of American economic life, but it strikes hard at those aspects of economic activity most important to those just starting their careers or struggling to climb up the economic ladder: It strikes at job creation and income growth.
William W. Beach is Director of the Center for Data Analysis at The Heritage Foundation.