We like our senior United States senator, Blanche Lincoln, but we would like her a lot more if she did not feel compelled every time that her re-election approaches to throw a lifeline to the scions of vast fortunes. Here’s what we mean: This week, she and Sen. John Kyl, Republican of Arizona, got the Senate to pass a resolution pledging to give some $250 billion of tax relief to people who inherit huge fortunes.
The giant giveaway to people who need it least will almost certainly be scrapped in conference with the House of Representatives so that the country will be spared this unfair and deficit-producing bonanza for the exceedingly rich and Senator Lincoln will have cemented her favor with the people who are important when you are raising a treasury for re-election.
We understand why she does these things, but we wish she were not obliged to do it.
The Lincoln-Kyl resolution raises the inheritance assets that are exempt from taxation from $7 million to $10 million and would lower the top tax rate, which applies to those with truly stupendous estates, from 45 percent to 35 percent. Senator Lincoln issued a statement explaining her reasons: “We are in a recession and this relief to those who inherit small farms and small businesses would help struggling families keep the business or farm and over the long haul create new jobs as these heirs spend the tax savings on job-creating investments.
“These are the people who, if we reform the estate tax, will invest in their business and create more jobs rather than spend capital on protecting their families from a 55 percent tax burden should they die,” the senator said in a statement yesterday.
The traditional name for it is trickle-down economics.
Here are the facts:
Not one family estate in America — not one — will pay 55 percent of the estate into the federal treasury. The average effective tax rate on the tiny handful of estates that are subject to any tax at all is less than 20 percent, which is lower than what the average working family pays on their income. Remember, most of the assets subject to the estate tax are unrealized capital gains on investments and would not be taxed at all if there were no estate tax.
Contrary to the assertion by Senator Lincoln and those who have campaigned for years to end the century-old estate tax, farms are not being liquidated to pay estate taxes, an urban legend that will not go away. Under the existing parameters, an estimated 140 estates in the United States would owe any tax in 2011. Senator Lincoln cannot identify a single family farm in her East Arkansas farm district that has had to be sold to settle estate taxes. The law gives special consideration to small businesses and farms. Estate planning can usually avert taxes on even substantial estates, and heirs can stretch out the payment of the taxes for up to 13 years.
Stung by criticism that she was sponsoring the measure to help her old-time supporters, the Walton family of billionaires, Lincoln said it was not aimed at the Waltons and other billionaires at all. “I can assure you that they do not care,” she said. Rather, it is for small Main Street businesses and family farmers.
The Center for Budget and Policy Priorities, which tracks these tax questions better than anyone else, calculated that only two-tenths of one percent of the additional cost to the treasury of Lincoln’s proposal over the estate tax provisions in President Obama’s budget blueprint would benefit small farmers and businesses. The other 99.8 percent would go to, well, the heirs of people like the Waltons, good Americans all, but not yet needy of our help. The huge tax reductions and credits for working families and small business in the Obama stimulus and budget will aggravate the deficit, but we have to trust that it will stop the economic slide. The senator’s estate-tax cut would engorge the deficit with no offsetting benefit.
Let’s hope that it at least produces a good payoff for the Lincoln in 2010 treasury.
