Sixteen months into the recession, the pace of job losses is worse than in the deep 1981-82 recession, a growing number of families are making excruciating choices with their shrinking pocketbooks, and the federal government is facing stunning budget deficits as far as the eye can see.
So, is this the time to spend about $90 billion over the next decade to give the nation's wealthiest households a new, multi-million-dollar tax cut?
The U.S. Senate apparently thinks so.
Earlier this month, it voted 51 to 48 to add to its 2010 budget plan a proposal by Senators Blanche Lincoln and Jon Kyl to substantially weaken the estate tax. Only the wealthiest 1 of every 400 people who die -- the top one-quarter of 1 percent -- would benefit from this proposal, since they're the only ones who owe any estate tax under current rules, according to the Urban Institute-Brookings Tax Policy Center.
Within this small group, the wealthiest of the wealthy would benefit the most. Estates worth over $20 million would get an average tax cut of $3.5 million.
This isn't a done deal. The House budget plan doesn't include this proposal, and Congress won't make its final decisions on the estate tax until later this year. But with the nation in two wars and a serious recession, and facing forecasts of damaging deficits for decades to come, the Senate vote is breathtakingly irresponsible just the same.
The estate tax is a tax on property (such as cash, stock, or real estate) that very affluent people arrange to transfer to their heirs when they die. President Bush's big tax cut of 2001 eviscerated the estate tax; in 2009, the first $7 million in value of a couple's estate is entirely free from tax and, in 2010, the tax disappears altogether for one year. But, unless Congress acts, the tax will then return in its much stronger, pre-Bush form in 2011, when the Bush tax cuts are scheduled to expire.
President Obama has proposed making permanent the estate rules that are in effect for 2009. The Lincoln-Kyl proposal, in contrast, would increase the exemption from the current $7 million per couple to $10 million and weaken the tax in other ways. This would cost $91 billion more than the Obama proposal during the first decade when Lincoln-Kyl's full budgetary effects would be felt, 2012-21.
How did Senate proponents sell their colleagues on the idea of spending so much money to benefit the estates of the wealthiest one quarter of one percent of Americans who die? Mainly with deceptive advertising.
In particular, they portrayed this tax windfall for the wealthy as an essential lifeline for small businesses and farms. The Lincoln-Kyl proposal would provide "crucial support and protection to small businesses, family ranchers, and farms," Minority Leader Mitch McConnell asserted on the Senate floor.
That's sheer nonsense.
Nearly all small farms and businesses are exempt from the estate tax under the current rules, so Lincoln-Kyl would do nothing for them. Only 100 small farm and business estates in the entire country would owe any estate tax at all in 2011 if Congress extends the current rules, the Tax Policy Center reports. Less than one quarter of one percent of the $91 billion in new tax cuts that the proposal would provide would go to estates that consist primarily of small businesses or farms.
But it was politically effective nonsense. Ten Democrats joined all Republican Senators in voting for Lincoln-Kyl: Max Baucus, Evan Bayh, Maria Cantwell, Mary Landrieu, Blanche Lincoln, Patty Murray, Ben Nelson, Bill Nelson, Mark Pryor, and Jon Tester. Senators supporting the measure typically stressed the small business angle. Murray's spokeswoman, for instance, declared, "Small businesses are hurting and we need to make sure they're protected."
Some proponents also claimed Lincoln-Kyl would not increase the deficit because Congress would offset its cost.
If you believe that, I have a bridge to sell you.
Both the Senate and House budget plans call for extending the 2009 estate tax rules without paying for it. (Extending the 2009 rules costs money because, under current law as noted above, the estate tax is scheduled to return to its larger, pre-2001 form after 2010.) If Congress isn't planning to offset the cost of extending the 2009 estate tax rules, it's extremely unlikely to offset the added costs of Lincoln-Kyl, which would be incorporated into the same bill.
Besides, even if Congress were willing to pay for this proposal, where would the money come from? Should we divert scarce resources from health care, education, anti-poverty measures, or deficit reduction to pay for a large new tax cut for the estates of the nation's elite?
Congress has a lot of tough decisions to make these days. This isn't one of them.
Loading comments… 
"Only 100 small farm and business estates in the entire country would owe any estate tax at all in 2011 if Congress extends the current rules"
But lets not let facts get in the way of our ideologica
If congress truly wants to help “small business” - and not just give lip service to that phony claim as an excuse to give yet another tax cut to the wealthy – than they need to fix the SBA regulation
Small businesses finance their expenditur
The day I see Congress looking out for the small business and not so wealthy I’ll eat the proverbial hat.
They are all crooks! Throw the bums out before they bring down the Democratic Congress in 2010.
In the article. Do you just read the headline?
Meet: THE DLC aka "The New Democrats" of which Obama is one.
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It's also nice to see the Senate representi
Bush borrowed from the Chinese to pay for those cuts and his two wars! Those costs for the wars were "off the book," meaning we didn't even see it as an expense in the budget. But we owe for it none then less. The mortgage and derivative bubble did the work of hiding the rest of the shortfall giving he appearance of actually growth in gdp, while we now know it was all pretend money.
Even Bush 1 raised taxes. When Clinton raised them we had 8 years of the best economic growth ever and ended with a surplus.
Cutting taxes doesn't work.
There is something rotten here
But you do raise a good point -- why does the Senate "require 60 votes" unless it's a bill the Republican
a little bit here the tax year comes again and I have to pay up. No matter how much I have deducted during the year, hardly bringing home anything, it is never enough. There is nothing to
deduct either since I have paid off my mortgage and there isn't anything else to take its place.
I say let us audit the congress since everyone of them seems to have a problem when picked for
an important position. And I bet they don't get hit with penalties and late fees.
And while were on the topic, they should also pay for their own health coverage, and the lifetime retirement packages they get after minimal time serving should end!