Even the Fat Cats Don’t Buy It

For all the right reasons, the push for repeal of the estate tax is losing steam in Congress, in no small measure due to spirited opposition from those who would benefit most--America’s leading fat cats. The problems with estate tax repeal and other proposed tax cuts that disproportionately aid the wealthy are also beginning to attract opposition from moderate Republicans.

Proponents of the repeal, a key component of President Bush’s $1.6-trillion tax cut package, have wrapped the issue in sob stories of farmers and small businesses forced to sell out to pay the tax. But only about six of every 10,000 people who die each year leave a farm or small business as the bulk of the taxable estate. In these cases, the law could be easily and cheaply adjusted to ease hardship for survivors. Among estates now big enough to trigger the tax, the proposed changes would produce a massive windfall and perhaps remove the biggest single federal incentive for charitable giving.

The rhetoric of the campaign for the repeal of the “death tax” has been highly misleading, implying that when someone dies, half of the estate is gobbled up by the government. That’s far from the truth. To pay any taxes at all, the estate must be bigger than $675,000, or double that for a couple. Those limits will rise to $1 million ($2 million for a married couple) by 2006 and ought to continue to be indexed to inflation--another simple fix.

According to the latest Treasury Department figures, of the 2.3 million people who died in 1998, fewer than 2% left estates big enough to pay any tax. Although the top estate tax rate is 55%, few pay it; the average tax on the gross value of an estate in 1997 was 17% when all the exemptions, deductions and credits were factored in.

For family farms and businesses that might otherwise be forced to sell assets, the exemptions could be lifted high enough to eliminate the problem.

Opponents of dropping the estate tax altogether include John J. DiIulio Jr., Bush’s advisor on the role of charities in social programs. He warned that the repeal would undermine charitable giving, which exempts contributions from estate taxes. George Soros, Bill Gates Sr. and more than 100 other wealthy people were more blunt, taking out soon-to-be-published newspaper ads to say repeal would “enrich the heirs of millionaires and billionaires, while hurting families who struggle to make ends meet.”

Congressional Democrats helped to pass repeal of the estate tax last year, knowing that then-President Bill Clinton would veto it. This time, the support of the very rich ought to stiffen their spines to oppose repeal.