All but four Democrats in the U.S. Senate, joined by a couple of Republicans, again blocked a vote to make repeal of the estate tax permanent. Even with help from those Democrats - and it's no coincidence that two of them are running for re-election in November - Republicans fell three votes short of the 60 they needed to end a filibuster.
It's happened several times before, and more's the pity. The estate tax has been declining year by year since 2001. But if the repeal isn't made permanent, the tax will return in full force in 2011, starting with estates as small as $1 million and rates as high as 55 percent.
That threat stifles productive investment, because what's the point of working to leave an estate for your children if you know the government will take more than half of it? The truly wealthy, meanwhile, still won't have any trouble protecting their assets.
Senators opposed to repeal say the United States can't afford to relinquish revenue from the tax, estimated by the Treasury Department to be about $66 billion by 2015 if it returns. But there's no way to estimate how much revenue is lost, and how many jobs, because of businesses that are never started, or whose owners choose not to expand when they could have. And it's not known how much people spend to shelter their estates from the tax, but it is substantial. That's a deadweight loss to the economy.
Sen. John Kyl, R-Ariz., has proposed a compromise, which could be voted on next week. His plan would raise the tax exemption to $5 million, and set the tax rate at 15 percent for estates up to $30 million. One problem with that is it plays into the class-warfare rhetoric of Democrats who claim, falsely, that repeal would benefit only the wealthy few who pay the tax. With a bigger exemption, even fewer estates will pay. Still, it would have slightly less pernicious effects than what we face now, so we hope Kyl can round up the necessary votes.
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