Today, Douglas Holtz-Eakin, economic adviser to Sen. John McCain (R-AZ) during his presidential campaign, appeared on Bloomberg News to talk about his latest endeavor: pushing for a complete repeal of the estate tax. Holtz-Eakin relies on a shoddy study that he put together for the American Family Business Foundation that falsely claims that an estate tax repeal would create 1.5 million jobs (which he upped to 2 million in the interview).
However, Bloomberg’s crew, which is usually much better about calling guests out on their nonsense, seemed very taken with Holtz-Eakin’s perspective, at one point saying that the numbers are “very impressive.” The most critical question in the entire segment was simply “how did you get those numbers,” and Holtz-Eakin’s explanation went unchallenged. Watch it:
Before Bloomberg has another guest on to talk about the estate tax, it should read up on the facts. Only 1.3 percent of the .24 percent of all estates who pay estate taxes are small businesses, making it very unlikely that a repeal would result in this much job creation. As The Tax Policy Center pointed out:
[T]he estate tax can’t have much effect on hiring by small business because hardly any owners ever face the estate tax. Most small businesses are worth far less than the exemption level (currently set at $7 million per couple and higher for many small business owners who value their firms at below market price). We estimate that only 100 small businesses and family farms would pay any tax in 2009.
Of these few businesses, “all but a handful would have sufficient liquid assets on hand (such as bank accounts, stocks, and bonds) to pay the tax without having to touch the farm or business.” And since the tax exemption is so high (with the first $7 million untaxed), the average effective rate the heirs to these estates will pay will be just 14 percent of their inheritances.
And while Holtz-Eakin expressed great concern about federal spending, no one pointed out that, were the estate tax repealed, “not only would Treasury lose nearly a half-trillion dollars over ten years that would have been collected directly by the levy, but also billions more that would be lost due to the new gaping hole in the tax code.”
As CAP’s Michael Ettlinger has said, harping on the estate tax amounts to “flacking for the Paris Hiltons, the rich heirs and heiresses who have nothing to do with small businesses.” So unless Holtz-Eakin believes that Paris Hilton is going to single-handedly create a host of jobs, his numbers need some work. And Bloomberg should know better than to let him use them unchallenged.