Tornado Alley (PROG)

[StephanieVanbryce]

Stat of the Week

By slashing the estate tax rate down to 35 percent, from the 45 percent in effect in 2009, notes Yale political scientist, Ian Shapiro, the White House and Congress have saved the heirs of the first billionaire who dies in 2011 at least $100 million.

Billions in Giveaways

December 16, 2010, 08:30 PM

The Obama administration and the Senate have agreed on a 35 percent estate tax that takes effect after the first $5 million of a decedent’s wealth has been excluded ($10 million for a married couple). House Democrats are furious. They would prefer a return to the 2009 law which consisted of a $3.5 million exclusion ($7 million for a married couple) and a 45 percent rate.

The differences in the exclusion affects a few small businesses owners and some yuppie millionaires — the working rich as Michael Graetz and I describe them in our book, “Death by a Thousand Cuts.” Enough of them are Democrats that, if that was all that was at stake, there would probably be less anger than there is. But the rate is what really matters to the super rich: about half of 1 percent of Americans whose estates are worth well in excess of the excluded amounts.

George Steinbrenner died this year, leaving an estate estimated at $1.1 billion. His estate goes untaxed because there is no estate tax in 2010. But if the Steinbrenner estate were to be subject to one or the other of these rates, the difference between 35 percent and a 45 percent would amount to more than a $100 million dollars in additional taxes to be foregone by Steinbrenner’s heirs.

And what if nothing was done and the repeal were simply allowed to expire on December 31, 2010 as currently scheduled? Then an estate the size of Steinbrenner’s would yield over $200 million dollars in additional revenue for the Treasury than the Senate bill that President Obama has agreed to.

It is one thing to cave in to yuppies and small businesses. But why is the Obama administration giving hundreds of millions of dollars to that tiny sliver of the American population that constitutes the super-duper rich? Why are so many Senate Democrats along for this ride? House Democrats should forget about the threshold and focus on the rate. That’s where the big bucks are.

http://www.nytimes.com/roomfordebate/2010/12/15/do-estate-taxes-matter/billions-in-giveways-to-a-tiny-group