The House of Representatives is set to vote this week on a bill that costs one-third of what health care reform proposals in Congress costs and, unlike the health care bills, is completely unpaid for and would be a direct hole in the federal budget. The bill, sponsored by Blue Dog Earl Pomeroy, would make permanent the lower the estate tax rate that was enacted by President Bush.
View the bill page and learn more:
H.R. 4145 — Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009
The estate tax is imposed on all taxable wealth of a deceased person that is transferred to another person by way of a will or state intestacy laws. In 2001, when President Bush came into office, one of his first actions was to gradually phase out the estate tax from 55% to 45% with a complete repeal in 2010. At the same time, Bush also increased the amount of each estate that would be exempted from the tax from $675,000 to $3.5 million between 2001 and 2009. Since the changes were highly controversial, he pushed them through in a bill combined with other tax cuts using the budget reconciliation process, which allowed the bill to be exempt from filibuster by Democrats. But, because of the Byrd Rule, the bill was written to sunset and revert back to the old rates after 10 years, meaning in 2011.
By the way, this budget reconciliation process that Bush used for his tax cuts bill is the same process congressional Democrats have available for them to enact strong health care reform legislation over the objections of Republicans and conservative Democrats. So far, the Democratic leadership is shying away from using it for fear of being too partisan. Instead, they are paring away at central components of the bill in order to win enough support from conservatives to defeat a filibuster.
Pomeroy’s bill to make permanent Bush’s lower 45% rate and higher exemption level is estimated to cost the federal government $234 billion over the next ten years. Unlike most bills in the House that would increase the deficit, the bill would not have to be offset with new revenue under pay/go rules. That’s because the statutory pay/go bill that the House passed this summer included, at the behest of the Blue Dogs, a special exemption for lowering the estate tax.
Needless to say, a lot of liberals in Congress are not happy with Pomeroy’s tax cut, which is specifically targeted at the wealthy. “I feel that it’s a contradiction to vote on a tax break for people worth $3.5 million and above while we’re sending troops overseas without any idea how we’re going to pay for it,” Rep. Raul Grija lva [D, AZ-7], co-chair of the Progressive Caucus, said today. Progressives generally favor an alternative estate tax bill sponsored by Rep. James McDerm ott [D, WA-7] that would lower the exemption to $2 million per person, adjusted for inflation, with a progressively rising tax rate based on the value of an estate, maxing out at 55 percent for estate valued above $10 million.
The Pomeroy estate tax bill is expected to pass this week, but the Senate, which is tied down with health care form for the foreseeable future, will still have to take it up before it becomes law. When it does move to the Senate, the tax could become even weaker. In April, the Senate voted favorably on an amendment to the budget resolution from Sen. Blanche Lincol n [D, AR] that proposes raising the estate tax exemption to $5 million for individuals and lowering the rate down to 35%.