To: Rep. Bill Jefferson [D-LA]
From: Jude Wanniski
Re: Death of the "Death Penalty"
Senate Majority Leader Trent Lott had a slip of the tongue on one of the talk shows Sunday and said he wanted to end the “death penalty,” when he meant the “death tax.” He decided he liked the ring of it and has been referring to the Gift and Estate Tax as the “death penalty” ever since. If he can get the House-passed bill to a vote when Congress returns after the July 4 recess, it will easily pass and go to the President’s desk for his signature or, as he now threatens, his veto pen. Because of your work in supporting repeal of the death tax, especially in persuading several fellow members of the Congressional Black Caucus to support repeal, you are in a good position to influence the President in the right direction instead of following through with his veto.
As you know, the White House is now offering a version of the alternative bill on estate-tax “relief” offered by your good friend Rep. Charlie Rangel, the ranking Democrat on Ways&Means. Instead of phasing out the death tax, he merely would increase the exemption to $4 million from $650,000, and do this right away. The President not only supports that idea, but also ups the amount to $5 million, as recommended by Vice President Al Gore. I noted that Sen. Mary Landrieu, a fellow Democrat from Louisiana, said she supports both measures as neither one satisfies her. She would like the tax repealed but also likes the Rangel/Gore idea of immediate relief. Because there is so little money involved relative to the other tax proposals around, and because the administration now finds the projected surplus in revenues climbing to $1.87 trillion over the next decade, this “compromise” should be worked out -- giving half the credit to Gore Democrats and half the credit to Bush Republicans. You might talk to Charlie Rangel about this.... and also talk to Sen. Bob Torricellli [D-NJ], with whom you worked last year in an unsuccessful attempt to work out a bipartisan tax cut in harmony with Sen. Paul Coverdell [R-GA] and Rep. Lindsey Graham [R-SC].
To help you out, you need some solid supply-side arguments on why repeal would be good for the national economy. The fact that 80% of Americans support repeal tells us this tax “casts the longest shadow” of all federal levies, because the great majority of people have it on their minds as they plan their lives. I send you a press release issued this week by the Institute for Policy Initiative in Dallas, which announces a report on the effects of outright repeal of the death tax. The report was written by Gary and Aldona Robbins, who worked as tax specialists in Democratic and Republican administrations and now run Fiscal Associates in Arlington, Va. They are the best at what they do, I think, and while they are associated with GOP tax policies, because of their work they basically will design efficient tax systems for any political party or any government. You should at least get to know them and would soon find you could work with them.
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Obituary of a Death Tax
Dallas, TX: The Estate tax, a resident of the American tax code for over 80 years, has smothered its survivors in financial burdens long enough. Arrangements for termination are pending in the Senate next week, which could rid society of this egregious tax and leave future generations a great legacy, according to a report by the Institute for Policy Innovation (IPI).
"Congress has a golden opportunity to kill the death tax now while static costs are relatively low," say IPI senior economists Gary and Aldona Robbins. "Over the next decade, eliminating the federal estate tax would increase GDP by almost $1 trillion over the next decade; increase the stock of U.S. capital by almost $1.7 trillion and create 275,000 more jobs."
This type of growth would produce over $5 in extra GDP for every dollar of static revenue loss. Within ten years the tax cut would pay for itself.
Today estates worth $675,000 are taxed at 37%, rapidly rising to 55% for estates valued at over $3 million. That's a great hike from 1916 where estates above $9 million (in today's dollars) were the only ones taxed.
Small businesses are hit particularly hard. Government forces descendants to act as pallbearers of the death tax, paying an unsympathetic Treasury in cash only. No payments-in-kind will suffice.
- Estate taxes generate less than one percent of federal revenue.
- Estate tax compliance costs the economy almost as much as the revenue raised.
- High marginal rates often force heirs to sell family farms or businesses just to pay the estate tax bill.
- High marginal rates discourage savings and thereby reduce economic growth.
Nothing justifies the continuance of the estate tax. Nothing.
This information taken from IPI policy report "Burying the Estate Tax" by senior fellows Gary and Aldona Robbins. For further information or copies of this study, contact Sonia Hoffman or Tom Gianetti at (972) 874-5139 or visit IPI's Website www.ipi.org. The authors are also available for interviews.