According to a post at The Nation’s blog, Rep. Jim McDermott (D-WA, 7) will introduce a new bill when Congress returns to session next week making the estate tax exemption level lower and the tax rate higher than they’ve been since the end of the Clinton Administration.
If McDermott’s bill is the same as the version he introduced last year (the new one hasn’t been introduced yet, so the bill text isn’t available), it would set the exemption for the tax at $2 million and set the top tax rate at 55 percent. That’s not quite as serious as the estate tax was under Clinton, but it’s much stricter than the estate tax would be in 2010. Under a Bush-era tax law, the estate tax has been phased out a little every year since 2001, and 2010′s the year estate tax is set to expire, albeit temporarily.
Almost everyone in DC is in favor of reforming the estate tax before that happens—including President Obama, who suggested freezing the tax and exemption rate at this year’s levels, as opposed to allowing the possibility that legislators will make the 2010 repeal of the tax permanent. But McDermott’s guidelines are much stricter—in 2009, the top rate is 45 percent and the exemption level is $3.5 million, where they would stay under the Obama proposal. And because of that, policy wonks like those at the Washington State Budget and Policy Center are likely to be warmer to it.
“We have to ask, is it fiscally responsible to weaken the estate tax?” asked Ben Secord, a federal budget specialist at WSBPC, when I talked to him this afternoon. “The estate tax is the most progressive federal tax. If we’re going to be fiscally responsible, we need to be looking not just at cost saving, but at revenue options as well.”
McDermott is taking the opposite approach from Sens. Patty Murray and Maria Cantwell, who both voted for a budget amendment on April 3 to reduce the top rate to 35 percent and set the exemption at about $5 million. Their offices told me they were looking at cutting back the estate tax in the budget as a way of getting the ball rolling on bipartisan reform. They also said they were trying to help out small businesses.
The latter argument continued to get torn apart last week, especially as the tax policy wonks latched on and got into the math. On Monday, Secord did a post on Smudget, the WSBPC blog, linking a Tax Policy Center report, using 2007 data, that broke down the current estate tax rate state-by-state. According to that study, only four small businesses or farms are actually effected by the estate tax at 2009. “There’s a widely-held perception that this tax effects more people than it actually does,” Secord says.
