U.S. Senate goes two ways on estate taxes

April 3, 2009

The U.S. Senate went two different ways on the estate tax, which has been a contentious issue for years — a tax congressional Republicans have villified as the “death tax”.BRITAIN-RICHARDSON/

Senators voted 51-48 to include a provision in the fiscal 2010 budget that called for exempting estates at $5 million for individuals and limiting the tax to 35 percent — though the measure is non-binding and could be stripped out when the legislation is melded with a separate budget that passed the House of Representatives.

The amendment provoked a moment of drama in an otherwise long day of voting in the Senate where Democratic leaders scrambled to find the votes to kill the amendment, which scores some political points to those who have rallied against the estate tax for years.

The amendment was backed by several Democrats, including a couple senators facing tough re-election bids next year, Senators Blanche Lincoln of Arkansas and Patty Murray of Washington.

The New York Times was so incensed by the amendment it wrote the following in its lead editorial on Thursday:

“The proverbial millionaires next door — the plumbers, contractors and accountants who amass substantial wealth through hard work and modest living — are not the intended beneficiaries of the proposed cut. The Obama budget already takes care of them, because it retains today’s law, which imposes the estate tax only on couples with property worth more than $7 million, or individuals with property worth more than $3.5 million. That means 99.8 percent of estates will never — ever — pay a penny of estate tax.”

Senate Minority Leader Mitch McConnell argued that “No one should have to be taxed on their assets twice, and no one should have to visit the taxman and the undertaker on the same day. But if we can’t repeal this tax, then we should at least lower it at a time when Americans are already burdened by shrinking retirement savings.”

President Barack Obama had proposed in his budget plan keeping the estate tax exemption at its current level of $3.5 million and tax the rest at 45 percent.

But minutes later the Senate adopted a second amendment that would require a 60-vote threshold to change the estate tax rate and exemption beyond the current levels unless commensurate tax relief was offered those who earn less than $100,000 annually.

Since Republicans now have only 42 seats in the Senate, and 10 Democrats supported the earlier amendment, reaching 60 votes likely would be tough.

In any event, since the amendments are part of the non-binding budget resolution, the votes are really just symbolic.

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Most people have built up wealth through realestate, 401Ks and small business. I don’t know if any one is paying attention, but retirement accounts have been wiped out. Small business’ are failing and realestate has plummeted. I think this has had something to do with the current economic collapse. However, I’m sure Rahm Emmanuel, Tim Gietner, Lawrence Summers and other present and former administration officials are glad someone in Congress is looking out for them.

Posted by Anubis | Report as abusive

The Estate Tax — signed into law by Republican Teddy Roosevelt — now applies only to the highest .2% of income earners.

As the recent and widespread shenanigans on Wall Street has shown, it really is about time someone looked after the well-being of the top .2% earners. As a Wall Street friend of mine said, “I don’t care if I loose my job, I’ve made so much money I don’t need to work for at least five years.” Who will look after this man?!

And Mitch McConnell could use an economics refresher: The top .2% earners in this country make a significant amount of their earnings in capital gains (e.g. hedge fund managers) who pay a 15% tax rate on the vast amount of their earnings, and not the top-end 36% the rest of us pay.

These people make massive amounts of wealth in a system taxpayers maintain. How is this fair?

Posted by jvill | Report as abusive