After the Senate is finally done working on its tax extenders package (a vote on which has been pushed to next week at the earliest), it may turn to legislation aimed at boosting small business lending. The bill in question has been clogged up in the Senate Finance Committee thanks to Sen. Jon Kyl (R-AZ), who has been knotting up negotiations over his insistence that the legislation include an $80 billion tax cut for the heirs of multimillionaires.
Democratic leaders have decided to forego a markup in the Finance Committee, in favor of bringing the bill straight to the Senate floor, thus avoiding Kyl and what may well be a receptive gang of Democrats (who on the Finance Committee are more conservative). But that, of course, will not quell Kyl’s zeal for cutting taxes for the richest of the rich:
A small-business bill coming soon to the Senate floor could provide the catalyst for a big issue: the long-awaited debate over the future of the estate tax. Asked Thursday whether he planned to push for an estate tax amendment on that bill, Minority Whip Jon Kyl said: “Count on it.”
This particular small business lending bill has rightly been described by National Journal as “on-again, off-again,” in large part due to Kyl’s continued insistence that doing something for small business lending be coupled with cutting taxes for the richest 0.2 percent of households in the country. Currently, 62.5 percent of estate tax revenue comes from estates worth more than $20 million. Another 35 percent of the revenue comes from estates worth between $5 million and $20 million.
Kyl, remember, wants to institute an estate tax of 35 percent with a $5 million exemption. The estate tax has currently expired, but is scheduled to come back next year at a 55 percent rate with a $1 million exemption, and the House has already approved permanently reinstating the tax at the 2009 level of 45 percent with a $3.5 million exemption. Adopting Kyl’s plan would cost up to $80 billion, and he’s searching the budget for offsets, raising the prospect that Congress will find that much in revenue only to turn it right back over to the very wealthiest Americans.
Considering that deficit hysteria has gripped Capitol Hill, scuttling everything from extended unemployment benefits to jobs programs to health insurance subsidies for laid-off workers, raising money to cut the estate tax would be particularly unconscionable. At this point, any revenue gained from tweaking the tax code should be going towards job-creation and reinforcing the frayed (and, in places, entirely broken) social safety net.
There is, of course, a benefit to clearing up the ambiguous state of the estate tax and setting a permanent rate. But setting it at the 2009 level, as the House did, is already a compromise compared to current law. Cutting it further would be an unjustifiable gift enriching the already rich.