Posted on January 13, 2009

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Democrats Move to Block Estate-Tax Repeal

President-elect Barack Obama and Democratic leaders in Congress plan to move soon to block the estate tax from disappearing in 2010, suggesting the levy might outlive the "death-tax repeal" movement that has tried hard to kill it, the Wall Street Journal reports.

Elimination of the tax on big inheritances was approved by Congress under President George W. Bush in 2001, with rollbacks phased in slowly and its full elimination slated to take effect next year. Now, with Democrats controlling the White House and both branches of Congress, the Senate Finance Committee is expected to move within weeks to craft legislation to reverse repeal of the tax, while the president-elect is expected to detail his own proposal in the next month or so. Under the plan he outlined during the presidential campaign, the tax would be locked in permanently at the rate that took effect this year. That would mean the elimination of estates of $3.5 million — or $7 million for couples — from any taxation. Estates valued above those levels would be taxed at 45 percent.

Enacted in the early twentieth century as a levy on Gilded Age wealth and inherited assets, the estate tax is applied primarily to the estates of the rich and super-rich. In recent years, however, those with small businesses and family farms have argued that the tax makes it difficult for them to pass on those businesses to their children and grandchildren. The Democratic plan would mark a stark defeat for these groups, which have sought an estate tax with the largest possible exemption — $10 million for individuals, or $20 million per couple — thus rendering virtually every small business exempt from taxation.

In making the case against repeal, Democrats argue that the affluent have already benefited handsomely from the Bush tax cuts. Moreover, with the federal deficit already in record territory, any additional stimulus gained by repeal of the tax would be minimal. Indeed, in a recent interview, Senate Finance Committee chair Max Baucus (D-MT) said he will move in the next few weeks on legislation to deal with urgent tax matters not related to the economic stimulus package. According to one of his aides, estate-tax preservation will be front and center in that effort.

Weisman, Jonathan. “Obama Plans to Keep Estate Tax.” Wall Street Journal 1/12/09.

Primary Subject: Philanthropy and Voluntarism
Secondary Subject(s): Public Affairs
Location(s): National

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