On paper, a mere 10 percentage points and 2,860 wealthy taxpayers separate Republicans and Democrats in the fight over taxing multimillion-dollar estates. The political differences loom larger.
As the U.S. Congress moves to reinstate the estate tax next year with a top 35 percent rate, the lowest in 80 years, Republicans say they’ve made concessions after seeking to abolish the levy, while Democrats insist the new rules would benefit the nation’s wealthiest households at a time of record income inequality.
The compromise by President Barack Obama and Senate Republicans to extend Bush-era tax cuts would subject 3,600 U.S. estates to any tax, of an estimated 2.6 million projected deaths in 2011, according to estimates. House Democrats support an alternative that would collect a higher rate of tax from 6,460 multimillionaires. While that’s a difference of just 2,860 taxpayers, Democrats see the new compromise as an affront to the philosophy of taxation based on ability to pay.
“Their concern is the estate tax is and has long been the most progressive tax in the system,” said Columbia University law professor Michael Graetz, who wrote a 2005 book on efforts to repeal the estate tax. “It’s symbolic for the Democrats of the difficulty of raising much revenue at the top of the income scale.”
House Democrats last year voted to reinstate the estate tax permanently with a 45 percent top rate and a $3.5 million per- person exclusion, a measure that died in the Senate. That would generate $14 billion more in revenue over two years than a provision in the current tax measure, according to the Joint Committee on Taxation.
Estate Tax Gulf Deeper Than Dispute Over Rates, Exclusions – Bloomberg