When the 2003 Bush tax cuts were passed, a phase out of the estate tax began that culminated this year with the tax’s full repeal. But since the Bush administration wanted to minimize the long-term cost of its massive tax cuts (which overwhelmingly benefited the richest Americans), they expire at the end of this year. So the estate tax is scheduled to come back at its Clinton-era level of 55 percent with a $1 million exemption in 2011.
This week, New York Yankees owner George Steinbrenner passed away, making him at least the third billionaire to pass on his estate to his heirs tax free. Today, during a Senate Finance Committee hearing Sen. Jim Bunning (R-KY) said that Steinbrenner is a genius for dying this year and escaping the estate tax:
“Because he was smart enough to die in 2010, there is zero tax liability on the estate tax,” he said.
Bunning’s comment echoes those Rush Limbaugh made earlier in the week, saying Steinbrenner “knew when to die,” because of the repealed estate tax. Steinbrenner’s net worth was about $1.15 billion, making him the 341st richest person in America.
Some conservatives have seized on the expiration of the estate tax to push for cutting the rate going forward. Today, Sens. Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) reintroduced their plan to cut the rate to 35 percent with a $5 million exemption, complete with a Bush-style phase-in “meant to make the short-term cost of the bill appear smaller.” President Obama and many Democrats, meanwhile, have proposed permanently setting the tax at the 2009 level of 45 percent with a $3.5 million exemption.
The Lincoln-Kyl plan would cost about $91 billion more than permanently adopting the 2009 rate, which itself costs hundreds of billions relative to current law. Lincoln and Kyl have said that they plan to raise spending offsets to make up the difference, raising the prospect that Congress will waste offsets on a tax cut for the richest of the rich.
After all, only the wealthiest 0.25 percent of households are subject to the estate tax at the 2009 level. At that rate, 62.5 percent of estate tax revenue comes from estates worth more than $20 million and another 35 percent comes from estates worth between $5 million and $20 million. Sens. Sheldon Whitehouse (D-RI), Tom Harkin (D-IA), and Bernie Sanders (I-VT) have proposed an even more progressive estate tax, adding higher rates for estates worth more than $10 million, $50 million, and $1 billion.