Conservatives have picked this week to declare all-out war on the estate tax. On Tuesday, President Bush urged that it be “repealed forever” (for the somewhat mystifying reason that it would increase “certainty in the tax code”–whatever that means). And, just this morning, Senate Majority Leader Bill Frist published an op-ed in the Wall Street Journal lambasting the estate tax (or “death tax” as he is fond of calling it). His central argument:
Imagine working your entire life to build a family business — a farm, store, motel or restaurant. Every hour you work and every decision you make is with the express goal of growing your business, so you can provide for your family and pass something on to your children. Dutifully, you pay your taxes owed, you weather the droughts, survive the downturns, and, in the end, you come out ahead.
Now enter the death tax. The reality is that the business you’ve worked so hard to pass on to your family may have to be sold. This may be the only recourse for your loved ones to pay the burdensome taxes on your estate.
You can imagine Senator Frist’s eyes getting a bit misty as he weaves this tragic, touching tale. And quite a few people must find this convincing, because it seems be to the Right’s central talking point in the debate — that the estate tax hurts small businesses, especially family farms. (Bush has made the same claim elsewhere.)
Unfortunately, this is a profoundly misleading argument. Fortunately, a study released last month by the nonpartisan Congressional Budget Office flattens it. Contrary to what conservatives have been saying, the CBO found that almost no farms and small businesses are unreasonably burdened. In 2000, only 300 farms would have had to pay the tax under current exemptions (which cover estates valued at less than 1.5 million dollars). And of those 300, only 27 would have been taxed in excess of their liquid assets. Repealing the tax, on the other hand, would cost our nation almost 1 trillion dollars over the first ten years.
But still, according to Frist, the tax that produces trillions in revenue and harms 27 people is the “cruelest, most unfair tax our government imposes.” (Current U.S. population: 295,734,134) Interesting.