Blanche Lincoln's Revenge
Perhaps the worst part of President Obama's very bad deal on taxes concerns the estate tax. After all, what Ezra Klein deemed "noxious" is a $7 billion annual giveaway to the heirs of the largest fortunes in America. It is estimated that only 0.11% of estates and just 40 family farms and businesses nationwide would owe tax. And for that, Americans can thank not just obstructionist Republicans but outgoing Arkansas Senator Blanche Lincoln. After a bruising Democratic primary and one-sided reelection defeat, on her way out the door the Senator from Wal-Mart delivered for her real constituents.
First a little background. In 2009, only 1 in 500 American estates paid taxes. But without new legislation in Congress, in 2011 the estate tax rate would jump back up to its pre-2001 (and pre-Bush tax cut) level of 55%, starting at $2 million per couple. In December, the House voted 225-200 to maintain 2009's rate of 45% beginning at $3.5 million per person or $7 million per couple, a proposal endorsed by President Obama. But as 2009 ended, Jon Kyl led the successful GOP effort to block the bill, ensuring the temporary, one-year expiration of the estate tax on January 1st of this year.
And that effort, one which allowed the estates of George Steinbrenner and Texas billionaire Dan Duncan to escape taxes altogether in 2010, Kyl was aided and abetted by Blanche Lincoln. For Kyl, the lower 35% rate and $5 million per person threshold they jointly proposed was a rest stop on the road to the Republican dream of killing the "death tax" altogether. But for Lincoln, as the Arkansas Times pointed out, it was all about taking care of business - for Wal-Mart:
Please note that the cut in the top estate tax, from 45 to 35 percent, will be worth a cool $9 billion at current values to just the top five Walton estates. 9 BILLION. Who'll pay for that lost revenue (not just from Waltons but Kochs, etc.) over the years? The working schlubs, that's who.
Which is exactly right.
Under the 2009 rate, 99.8% of estates owe no estate tax at all. And as the Center on Budget and Policy Priorities (CBPP) showed, over 62% of estate tax revenue comes from the "extreme wealthy" with fortunes greater than $20 million. "Only three percent of taxes owed" are paid by estates under $5 million. But as the Washington Post explained in April 2009, those are precisely the pockets Lincoln and Kyl want to line:
The estate tax is scheduled to disappear in 2010, only to be resurrected the following year at its 2001 level, when it applied only to estates worth over $2 million per couple at a rate of 55 percent. In fact, no one expects it to return to that level -- although letting it do so would be a far more rational response to the current crisis than the Lincoln-Kyl approach. Rather, President Obama has proposed holding the tax at this year's level: an exemption of $7 million per couple, with a 45 percent rate for amounts beyond that; this would cost $484 billion over 10 years. Senate Finance Committee Chairman Max Baucus (D-Mont.) has endorsed this solution, with indexing for inflation. This would hardly be punitive. At that level, 99.76 percent of estates would incur no tax whatsoever. Those who owe would pay, on average, $2.25 million less than they would have paid at the 2001 exemption level. Why in the world should these folks get more of a tax cut?
The Republican scam over the so-called "death tax" is as bogus now as it was when President Bush first perpetrated it nine years ago. (This fall's GOP Pledge to America called for eliminating the estate tax altogether. CBPP estimated that ending the estate tax would cost the United States Treasury $1 trillion over 10 years.) While Nevada Senator John Ensign griped, "It destroys a lot of small businesses and a lot of family farms and ranches in America," House Minority Leader John Boehner (R-OH) groused:
"People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farm in order the pay the taxes."
As it turns out, of course, not so much.
While CBPP estimated that only 1 in 500 estates is impacted by the current law, the Tax Policy Center quantified last year just how few family farms or small businesses are actually impacted by the estate tax proposals under consideration:
We estimate that under the Obama proposal, 100 family farms and businesses would owe tax. (We define such estates as those where farm or business assets are valued at under $5 million and comprise the majority of estate assets.) The Lincoln-Kyl proposal would cut the number to 40. Even under current law, fewer than 2,700 family farms and businesses would owe tax.
Nevertheless, Senator Lincoln parroted the bogus GOP talking points. "Lincoln argues," The Hill reported in May, "that small businesses don't have the profit margins to survive the coming tax hike on estates if Congress fails to act before the end of the year." As she put it:
"I don't think there's any American out there who believes you should work all of your life to find that when you die, 55 percent of [your estate] has got to go to the government...
"The ultra-wealthy don't deal with the estate tax," she said. "The Bill Gateses of the world -- those individuals don't deal with the estate tax because their estates are so large. They've already figured out how to do a foundation or they've used tax attorneys and the estate planners and accountants and everybody to figure out how they deal with the kind of wealth they have."
Of course, the Gateses of the world support the estate tax even if the Waltons do not. In a further irony, Gates father and son support "The Giving Pledge" in which American billionaires promises to give away half of the estates to charity in their lifetimes. And in a final irony, study after study shows that eliminating the estate tax or even just lowering the rate and raising the exemption will seriously undermine charitable giving.
But none of that matters to Blanche Lincoln. That thorn in the side of progressives has gotten her revenge. And as the Senator from Wal-Mart returns home with the Obama tax deal in pocket, the Walton family, if few others, are extremely grateful.