House Speaker Nancy Pelosi has been given a charge from the chamber’s Democratic caucus to negotiate a better tax deal than President Obama got from Senate Republicans.
And Pelosi says she will do just that.
But what’s her "ask"? What’s her credible—and doable—demand?
Pelosi should pull no punches. But, If we assume she cannot get the Republicans or Obama to abandon the absurdly uneven trade-off that defines the deal—a two-year extension of tax cuts for billionaires in return for a one-year extension of basic benefits for the unemployed—then she has to look elsewhere.
For plenty of practical and political reasons, Pelosi can and should start the pushback by focusing on the side deal to renew the estate tax with broad exemptions for millionaires—up to $5 milion for individuals, up to $10 million for couples—and a top rate of 35 percent for the coming two years.
Pelosi has already pointed to the estate-tax agreement as a bone of contention for House Democrats.
“We believe the estate tax in the bill is a bridge too far,” the Speaker has said.
Her closest ally in the Congress, House Education and Labor Committee chair George Miller, D-California, is even blunter: "The estate tax [bargain] is just gratuitous."
Pelosi and Miller won’t have any problem making that argument to their caucus, which was blindsided when the White House announced it had not just embraced but actually inflated the estate-tax exemption Republicans had been proposing.
Nor should they have much problem making the case to the great mass of Americans.
This really is a giveaway to millionaires. Indeed, as the group United for a Fair Economy notes, "The deal [Obama accepted] would make the estate tax even weaker than it was under President Bush, and the weakest it has been in seven decades."
The scheme to exempt the first $5 million of an individual’s estate, and the first $10 million of a couple’s estate, and only tax amounts above those exemptions at 35 percent is, according to OMB Watch "a proposal that conservative pundits and politicians have been pushing for years because they know it will essentially eviscerate the estate tax."
"Originally," the watchdog group notes, "President Obama had been calling for extending 2009 estate tax levels as a compromise on the issue. An extension of the 2009 estate tax would exempt the first $3.5 million ($7 million for couples) of an estate’s value and tax any amount above that at a rate of 45 percent. This proposal was more than generous to the wealthy of this nation, as it would affect less than one percent of estates each year."
OMB Watch has got a few more arguments for Pelosi to make:
1. Polls show a clear majority of voters want there to be an estate tax, believing that an exemption of between $2 million and $3.5 million is fair. Voters continually place the estate tax at the bottom of the list of taxes the government should cut.
2. Under the estate-tax proposals in the Obama compromise, only 0.15 percent of estates would pay any tax at all. That’s about half of the number of estates that would have owed tax at 2009 exemption levels.
3. Family farms and small businesses would be virtually unaffected by an estate tax set at 2009 levels. According to the Congressional Research Service, only 0.2 percent of estates with at least half of their assets in a business would owe any estate tax. It also estimated that, had the estate tax been at 2009 levels in 2000 (when the study was done), only thirteen farm estates would have insufficient liquidity to pay the estate tax.
4. Because the government does not tax assets bequeathed to a charity, the estate tax encourages charitable contributions. In this harsh economic environment, institutions that feed the hungry, shelter the homeless and train jobless workers are acutely feeling the crush of an increased demand for their services as their funding sources dry up.
OMB Watch’s bottom line is this: "Whether the government should write a $163 billion check to the nation’s richest families through the income tax code is certainly a topic ripe for debate, but what deserves special attention is how President Obama has inexplicably agreed to give away the store to Paris Hilton and other heirs to vast fortunes through the evisceration of the estate tax."
That’s a case Pelosi can make—to the president, to the Republicans and, above all, to the American people.
And if there is pushback, she can toss some Thomas Jefferson at them.
The author of the Declaration of Independence warned that America would be ill-served by "an artificial aristocracy founded on wealth and birth, without either virtue or talents."
"The artifical aristicracy is a mischievous ingredient in government," Jefferson warned, adding that "provisions should be made to prevent its ascendancy."
Where to begin? With a fair system of taxation that includes a robust estate tax.
In fact, Pelosi should stop calling it "the estate tax."
She should call it "the aristocracy tax."