New York Times EDITORIAL Long Live the Estate Tax Published: April 15, 2005 For the fourth time in four years, the House of Representatives has passed a bill calling for the permanent repeal of the federal estate tax. The Senate should put a stop to this silliness. The only thing driving the push for repealing the estate tax is ideology. It sure isn't sound tax policy. The House proposal would cost the federal government a whopping $290 billion through 2015, according to estimates by Congress's own budget agency. And that's just the start; the costs after that would be explosive. And for what? Repeal would shield the estates of the very wealthiest Americans from the tax. That's the same group that already benefits the most from Mr. Bush's tax breaks for dividends and capital gains. Repeal of the estate tax was deemed too expensive in 2001, when the government was still enjoying the Clinton-era budget surplus. So it stands to reason that it's out of the question today, as America's enormous deficits weaken the domestic economy and the country's international economic leadership. But to its proponents, estate-tax repeal is the holy grail of the Republican anti-tax crusade. The most commonly heard argument against the estate tax - that it represents unfair double taxation - is specious. First, the estate tax does not even kick in until the assets left at death exceed $1.5 million, or $3 million per married couple - and those exemption amounts will more than double by 2009. So most Americans never even have to think about the estate tax, let alone worry about it coming on top of some other tax. Second, much of the wealth transferred at death has never been taxed. That's because capital gains on assets like houses, stocks and bonds are not taxed until the asset is sold. Obviously, if you inherit, say, a house, its owner didn't sell it, so never paid any capital gains tax on it. Another popular argument against the estate tax - that the rate is so high the government is basically confiscating your property - is also a sham. Estate tax rates currently top out at 47 percent. But those rates don't even start to apply until an estate tops the multimillion-dollar exemption. As a result of the exemption and other deductions, the effective tax rate - the percentage that is actually handed over to the government - is much lower than the top stated rate. It was only 18.8 percent, on average, in 2003, according to the Internal Revenue Service. The estate-tax foes' real beef is not with the estate tax per se. It's with the principle that the more you earn, the more taxes you should pay and, specifically, with the idea oftaxing capital gains. Those debates are as old as the tax system itself. The Senate must stand firm for an estate tax that provides an ample exemption of up to $2 million per person, but with a top rate, 45 percent, that ensures that a reasonable amount is actually paid to the government. Anything less would impair fairness and could be fiscally crippling for decades to
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