New Hope for the Rich

I don’t usually prefer to rip off other’s titles, but this one from Friday’s NYT on the estate tax was too good to pass up. As proof that Americans are getting poorer, the article offers the following:

  • In 2007, home equity fell below 50 percent for the first time on record since 1945.
  • Total equity also fell for three straight quarters through last December.
  • Adjusted for inflation, the annual income of the typical working household is still below its peak before the last recession, in 2001.
  • That means the Bush-era expansion is on track to be the first since the government began keeping records in the 1960s in which household income fails to hit a new high.
  • Not good.

    And yet, in the Senate, Republicans are ready to do battle on behalf of America’s wealthiest families.

    Starting in 2009, the estate tax will apply to Americans with property at death worth more than $7 million per couple, or $3.5 million for individuals — a whopping 0.3 percent of people who die each year.

    As part of the 2009 budget resolution, Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee, has proposed to keep the tax at those levels, with annual adjustments for inflation. The proposal is expected to pass, as early as Thursday.

    Republicans, however, think that Mr. Baucus’s more-than-generous fix does not do enough to shield the wealthy. After it passes, Senator Jon Kyl, Republican of Arizona, is expected to propose further cutting the estate taxes of those still covered by the 2009 rules.

    That would give the wealthiest Americans an additional $200 billion in tax cuts over 10 years, with most of that largess going to estates valued at more than $10 million per person, the top 0.1 percent. The government would have to borrow to make up for the $200 billion giveaway to rich heirs, worsening the deficit and adding about $100 billion in interest to the nation’s tab.

    The Kyl proposal needs a simple majority to pass. So if every Republican voted in favor, only one Democrat would have to join them for the proposal to pass. It is not a given that will happen. What is certain is that a yes vote, by whoever casts one, would be a triumph of let-them-eat-cake obliviousness.

    So if I’m interpreting the author’s sarcasm correctly, s/he wants more people subject to the estate tax? Or is the writer simply lamenting our exploding deficit? I’m not sure.

    As a liberal, deficit-fearing American, the above does bother me, though it certainly doesn’t surprise me. The New Republicans seem to think we can just spend spend spend and pay no attention to the terrifying implications of Saudi Arabia and China literally owning us… Literally. But as an estate planner I’m torn: Do I want a lower individual exemption on the estate tax thus exposing more Americans to the highest tax bracket in the country? I may if it means I get to do more complicated drafting day-in day-out. (I’m kind of a drafting geek.) On the other hand, do I want a higher individual exemption (like the one that would result from Senator Jon Kyl’s proposal)? That could arguably keep my clients among the richest .1% in the country (lots of great work there!), or maybe it would simply mean – if the opening premise of the NYT article is correct, and American’s are getting poorer – that I would have less work in the aggregate… I’m not sure.

    The estate tax is such a moving target right now that its probably not wise to fix any emotional value its presently perceived future (or lack of)… Oh well… I have a trust to draft.

    Your thoughts?

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