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Published on Monday, June 26, 2000 in the New York Times
Members Of The Black Caucus Help Give A Handout for the Very Wealthy
by Bob Herbert
Somebody is getting snookered.

The House has overwhelmingly passed a proposal to repeal the federal estate tax, and now the Senate will most likely follow its lead. This is very good news for the very rich.

Ronald Reagan couldn't get rid of the estate tax. George Bush couldn't kill it. But an unlikely alliance of Congressional Republicans, conservative Democrats and a small but significant number of very liberal Democrats, including members of the Black Caucus in the House, is building a potentially veto-proof majority for this breathtaking windfall for the wealthy.

What is going on?

After the bill passed the House by a vote of 279 to 136, The Times, in an editorial, said, "Seldom have so many voted for a gargantuan tax cut for so few."

Estate taxes are overwhelmingly paid by the wealthiest families in the country. Very, very few Americans pay any estate taxes at all. But if those few could manage to get the tax lifted, they would reap a bonanza. So a disinformation campaign, designed to frighten middle- and working-class Americans into believing their assets will be devoured by the tax man rather than passed on to their survivors, has been used to build support for the repeal of the estate tax in its entirety.

In 98 percent of American deaths, there is no estate tax liability. An estate of any size can be bequeathed to a spouse free of any estate tax. For other bequests, a married couple is currently entitled to a $1.35 million exemption from the tax ($675,000 each), and that exemption will increase to $2 million by 2006.

As the Center on Budget and Policy Priorities reported last week:

"The vast bulk of estate taxes are paid on very large estates. In 1997, some 2,400 estates -- the largest five percent of estates that were of sufficient size to be taxable -- paid nearly half of all estate taxes. These were estates with assets exceeding $5 million."

If the estate tax had been repealed, the tax-cut windfall for those 2,400 estates would have averaged more than $3.4 million.

The argument for repealing the estate tax carefully avoided the fact that it would be an enormous boon for people who were inheriting many millions of dollars. Instead the estate tax was repeatedly characterized as a threat to small family-owned businesses and farms. According to this argument, it is necessary to repeal the tax to ensure that these small enterprises do not have to be liquidated to satisfy the demands of the tax.

The argument was wildly misleading. Only a tiny percentage of taxable estates had any substantial small-business or farm assets.

Nydia Velazquez, a Democratic congresswoman from Brooklyn who voted to repeal the tax, wrote in an Op-Ed piece in The Times that "the reality for family-owned small businesses is that one-third will be forced to sell or partially liquidate themselves to pay estate taxes on the owner's death."

She was wrong. Nothing remotely close to one-third of such businesses are even subject to estate taxes. So the idea of families being forced to liquidate them to satisfy the taxes is absurd.

Special tax breaks already exist for small family-owned businesses and farms, and additional tax relief can be crafted for those enterprises that remain vulnerable. But the idea that you have to get rid of the entire tax to protect a very small number of businesses that account for only a tiny portion of the tax makes no sense.

The measure approved by the House would lead to an estimated revue loss of $104 billion from 2001 through 2010. The Center on Budget estimates that revenue losses in the 10 years after that will be half a trillion dollars.

Repeal of the estate tax will face a presidential veto. But one of the ironies of this peculiar fight is that the votes needed to reach the two-thirds majority to override could come from some of the president's strongest allies.

Some black and Hispanic leaders have bought into the argument that the estate tax is a burden on ethnic minorities. Harry Alford, president of the National Black Chamber of Commerce, said repeal of the tax is essential "to protect our offspring from being taxed after our transition to heaven."

Copyright 2000 The New York Times Company


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