The most odious part of the tax deal agreed to by the Senate yesterday is that it would cut the estate tax beyond the 2009 level, giving the wealthiest 0.25 percent of households in the country billions in tax breaks that will do nothing to spur job creation. But it was reportedly the estate tax cut that ultimately got Republicans to sign onto the agreement with President Obama (making quite plain where their priorities lie).
In order to justify making tax cuts for the ultra-wealthy the price of extending middle-class tax cuts and unemployment benefits, Republicans have resurrected the conservative fiction that cutting the estate tax will somehow help small businesses. Sen. Jon Kyl (R-AZ) — one of the architects of the estate tax cut included in the deal — took to the Senate floor today to claim that the cut “is not about giveaways to the wealthy,” but rather “small business employers”:
The effect of the compromise will be to eliminate the “death tax” liability for about 90 percent of estates that would otherwise owe exorbitant sums. And according to the Institute for Research on Economics and Taxation, the “death tax” reform proposal in this bill will add more than $200 billion in annual economic growth relative to current law. So this is not about giveaways to the wealthy, as some have asserted. Most of the people helped by this measure are small business employers.
Kyl’s assertion has absolutely no basis in reality. According to the Tax Policy Center, at the 2009 level favored by President Obama and Congressional Democrats, just 6,460 estates in the country would be subject to the estate tax in 2011. Kyl’s plan spends $25 billion to lower this to 3,600. Of these 3,600 estates, just 50 could charitably be characterized as small businesses.
Even under Obama’s original proposal, just 110 small businesses in the country would have been subject to the estate tax, and their average effective estate tax rate would have been about 11 percent. For the exceedingly few businesses that might have trouble paying the tax, there are options in place to mitigate the pain. And while Kyl asserts that cutting the estate tax would somehow be a boon for economic growth, CAP’s Michael Ettlinger and Michael Linden characterized the estate tax cut’s impact on job creation as “negligible.”
As Eliot Spitzer pointed out, “the additional $25 billion [to cut the estate tax] is six times what we’re spending on Race to the Top and three times what was allocated in the stimulus to build high-speed rails.” And contrary to what Kyl would have us all believe, the money would almost all be spent to benefit the richest of the rich.