One area of the debate over the Bush tax cuts that seems pretty cut and dried is the estate tax. Right now there is no estate tax for 2010. If we do nothing, it will revert back to the Clinton-era rates of 55% for estates over $1 million dollars (that’s a marginal tax, by the way, so the tax on an estate worth $1,000,001 would be 55 cents). Various proposals would lower the marginal tax rate and increase the exemption; the most common proposal is to permanently set the estate tax at 2009 rates, with a 45% tax on estates over $3.5 million dollars, $7 million for a couple’s estate.
What’s important to understand is that this reversion to 2009 rates permanently would cost the country $292 billion dollars, according to the Tax Policy Center. If we made it retroactive to capture the tax on estates in this holiday year of 2010, maybe it’s closer to $250 billion. But it’s still a large hole in the budget relative to current law, in a time when every deficit hawk is screaming about long-term debt.
Therefore, it’s the height of faux-populist kabuki to assail the absence of the estate tax in 2010, and then promote a policy that would reduce estate tax receipts by hundreds of billions of dollars. And that’s where we find Robert Rubin today in the Wall Street Journal:
Congress is finally turning its attention to the expiring 2001 and 2003 tax cuts. But there is one tax issue that should have long since been addressed: the federal estate tax. That tax expired at the end of last year, and there have been no estate taxes levied this year. If a new estate tax is not enacted as soon as Congress returns from its August recess, this void will continue until the end of the year.
We would recommend continuing 2009′s regime, with a top rate of 45% and a $3.5 million individual exemption. Small businesses and family farms can be protected both through the exemption (which is $7 million for a couple) and through special deferred payment rules.
We also share the view that the estate tax is grounded in powerful philosophical underpinnings. Our nation views itself as a meritocracy and a land of opportunity and we have a proud legacy of upward mobility. An estate tax helps us promote this legacy, by avoiding the accumulation of inherited economic—and political—power that is antithetical to this historical vision of our society and to the vitality and dynamism that has contributed so much to our success. …
Our country is losing revenue that, with its stressed fiscal conditions, it can ill afford to forego.
And so Robert Rubin’s solution is to have the country lose even more revenue, every year into perpetuity, and hand it to multi-millionaire heirs and heiresses.
It’s quite incredible that Rubin thinks he can get away with this in the name of tax fairness. But alas, precious few politicians or observers have been blunt enough to speak the truth – the estate tax should just revert back to Clinton-era levels, when there wasn’t actually a problem. Only Sen. Tom Udall has been forthright enough to say that out loud.
In effect, Rubin and other Democrats – this was President Obama’s campaign plan, incidentally – are playing right into the trap set by President Bush when he enacted the one-year repeal. The hope was to either get the repeal instituted permanently, or to position the needlessly lower rates under the Clinton levels as the wise “middle course.” And sure enough, people like Rubin use those rates as the starting point. I would be fine with that if additional tax brackets were included to step up the rates for bigger estates, but on balance the new rates should take in as much revenue as the Clinton-era ones, or else it’s merely a giveaway.
We can only now rely on that old faithful, Senate gridlock, to restore the estate tax to a perfectly reasonable level, grounded in the American belief that people should earn their fortunes. We don’t have a landed gentry in this country, or at least we’re not supposed to.



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“It’s quite incredible that Rubin thinks he can get away with this in the name of tax fairness.”
How so? He created Obama like some kind of financial instrument out of thin air. At that point, isn’t the sky the limit? And it seems to me that the only people who are actually upset about taxes are the uber-rich so I guess I don’t understand what’s not supposed to make sense.
It’s a good thing that Robert Rubin is not Obama’s financial godfather or anything, –oh wait. As I keep pointing out, it is about the looting. The rich and powerful see every loophole as an opportunity to loot, and the estate tax is a big opportunity.
That has got to be one of the most upside down statements I have seen in a long time. What we have is a kleptocracy and Rubin is one of the chief villains that made it so. He is a financial terrorist of the worst kind. The damage he has done to this country makes bin Laden look like an inept Boy Scout. Note too how Rubin trots out the false myth of “upward mobility”. Thanks to people like him the US is now far less upwardly mobile than stodgy old Europe.
It is also important to remember what is at stake here. 1% owns 1/3 of the country. The top 10% own 2/3 of it. What Rubin wants to do is lock that wealth inequality in place and in perpetuity.
Rubin talks, Obama listens. And follows.
i don’t know why we can’t have a senate and house rule that conflicts of interest should automatically recuse a congressperson or senator from voting. these self interested bastards are either too rich or support contributors who are too rich. that would come down to 4 or 5 people like bernie sanders who are actually honest.
Taxation without representation at this point….for all but the rich
Yeah Right.. The Rich have Won the Class Warfare already with these tax rates… they will fight tooth and nail to keep them.. Sadly there are way to many bluedogs who will fuck the middle class for their “Landed” Masters..
We will continue to suffer until everyone pays their fair share in taxes.. But Pulease don’t hold yer breath waiting..
I don’t know what a million in Clinton’s day is worth today, but I do know that, even in these trying times, homes in certain areas can put an otherwise middle class person into the millionaire category. (Think New York, San Francisco, et al.) I don’t think 3.5 million is an outrageous top. I don’t happen to have a million dollar home, but I’ve seen mobile homes near the beach that are still valued at a half-million.
Bob Rubin and his neo-liberal free enterprise pirate buddies on Wall Street need to be investigated, indicted, tried and (not if, but when found guilty) thrown in Leavonworth for the rest of their lives. Barring that, they need to be drummed out of the Democratic Party. If the Dems won’t return to their Main Street values and kick them out, then we Lib/Progs need to make a choice: engage in civil war within the Party to take back the values we cherish, or find /develop a viable third party that reflects our values.
Why should the rich get to give the money they’ve made and saved throughout their lives to their widows and children?
In fact, why wait till they die. Let’s have an old testament Jubilee year every 40 years. All debts forgiven and all assets confiscated and redistributed.
After a few years, if the previously rich are so deserving, they’ll get rich again. And the previously needy who got something for nothing, maybe things will work out different in their lives next time, and they can give up their money next time.
Blair admitted in his memoirs that he likes the Tories more than the Labor, and doesn’t actually know why he ever joined labor. When will we hear the same stories from the retired dlcers. These people were infiltrators. In a sane world Rubin would have no influence on our side!
Um, yes, but……did the banksters really “make” their money….or did they maybe appropriate it? Did Mozillo (Countrywide Mortgage) ‘make’ his money honestly, or by foisting fraudulent loans onto unsuspecting home buyers? But, yes, I’d even let those hucksters pass on $3.5 million just so the unsuspecting middle class in high priced realty markets could pass on something. Over $3.5? — Tax it at 50+%……or more!
Surely you’re not speaking of the same president Bush who inhabited the WH between 2000 and 2008?
methinks you’re giving him *way* too credit.
The banksters didn’t steal all that money so they could give it back to us in the form of inheritance taxes. I mean-really.
I think Rubin’s proposal is reasonable.
There is no chance it will revert back to the 2001 regime. None.
One thing worth looking at is getting rid of the stepped-up basis rules for estates.
Practically speaking, it is too late to retroactively impose the estate tax for 2010. That is a damn shame.
That’s because we live in a kleptocracy. In our country, if you are a small thief you rot your life away in a prison. If you are a big time thief, you get villas on the Riviera.
You are missing the news in other papers. The Democrats in conservative areas are now vowing to not allow the tax cuts to end; otherwise, they will lose the elections. I win win for the rich!
This isn’t particularly recent data, but according to:
http://articles.moneycentral.msn.com/RetirementandWills/PlanYourEstate/5bigMythsAboutTheEstateTax.aspx
So your 50% vindictiveness is already in place.
BTW, I’ll never be in that ballpark, so it’s nothing personal.
Actually no. That was $20 million and up, not an average of $20 million so the average could be substantially higher. The net average of $10.4 million could be much less than 50%.
Acknowledged.
There’s a nice picture of the Biltmore Estate on the main article.
If only we could have gotten our hands on that estate, everyone in America could have gotten a plank or a nail.
So why would you want a Paris Hilton, say, or that horrid grandson of Pete Peterson to get to keep all that money? There is a difference between middle-classers who wound up with houses that are still over-valued or with farms or with small businesses as compared to the uber rich. I’m just sayin’……. degrees of ‘richness.’
On edit: why the use of the term “vindictiveness”?
Retroactieve taxes are not gonna happen, even if someone thinks they “might” be legal. The Rubin proposal sounds exactly what Obama proposed in the budget. However, one must assume there will be some negotiation here. There are other things the repugs want concerning capital gains and dividends. Obama has proposed giving them some of it, I think. But he was expecting the tax cuts to lapse on the wealthy and not the middle and lower classes. It now seems the dems in the senate are not going to play ball. They are afraid to let the tax lapse on anyone, including the wealthy. See article on HP. I don’t think we should be surprised. So at the moment there appears to be a stand off. There are not enough votes to ram through a lower tax on just the middle and lower classes, if the tax cuts lapse on everyone. Likely, the tax cuts will be extended for all. (that’s my current bet anyway) the estate tax is up in the air.
Sounds about right. I don’t understand the step up basis. I assume you pay taxes on the current value of the estate and then you carry that basis into the future, which would be stepped up, no?
Isn’t Bob Rubin also serving as a member of the Catfood Commission? Is it not too far fetched to consider whether the real mission of the commission is to figure out a master plan to preserve and protect the wealth of the richest people in the country at our expense under the guise of reducing the deficit?
They certainly are using that excuse to hijack the $2.5 trillion in social security as they also seek to make the Bush tax cuts permanent to supposedly create jobs, which we know from experience will never happen.
Yes, that is exactly what is happening. It ties Obama’s hands too since he has no room to manueuver. Looks like the health care thing all over again. The Tea Party is there to make sure of it, as they were this past year.
No. Step up in basis means that when I die my kids get whatever I have at the basis on my date of death, as opposed to what I originally paid for it. Which is certainly nice for stocks I bought 40 or more years ago that have split several times.
On edit: Don’t know what it means for the house I bought 8 years ago that is worth less than what I paid for it. Maybe would mean they might get a new tax basis?
Gotcha, I thought it was exactly opposite: that when you die the stocks are valued at their current value in your estate.
Rubin is pretty reasonable on this. The estate tax needed some work during the Clinton era, but ‘Guess Who’ wouldn’t allow reasonable changes? The 90′s Repubs. They made phony “Family Farm” arguments, but wouldn’t allow changes that would mitigate that situation.
The rate could be lowered some, and certainly the deductions needed to be raised. Find something worse to be p!ssed about, : )
Vindictive seemed highbrow, I thought jealous would sound cruel. Paris Hilton and that horrid grandson of Pete Peterson (whoever that is) don’t lust over any of your money.
This post is true. And, not raising the taxes on lower income people to 40% is also going to cost us a tremendous amount.
The reasoning is off the mark.
Saying that not raising a tax has a cost, is true, but it can be said about not raising ANYONE’s taxes. Not raising your tax to 50% costs us something.
Not raising your tax to 90% costs us more.
So, the logic is faulty.
Not boosting the tax on booze to $30 a bottle costs us a whole lot of money. Not taxing exports at 20% costs us HUGE.
One thing worth looking at is getting rid of the stepped-up basis rules for estates.”
I like that, but it changes the thinking behind the estate tax. Back in 1920′s the rich said calculating the capital gains on the transfer of assets at death meant finding the purchase price – and since so much was stolen, that was hard to do. So in lieu of a capital gains tax on the transfer on death, the rich asked for and got an estate tax.
If we eliminate the step-up in tax basis for inheritors, the tax becomes a “moderate the influence of inherited wealth” idea, with the children of the rich searching for those old receipts when they sell and must pay a capital gains tax.
Now I like the idea – but the rich will not – so Obama will not.
I like the idea of keeping the old 55% rate, but with the new 2009 3.5 million floor – there really has been inflation – even after the 50% declines in asset values of the last 2 years. The cost of JUST keeping the new floor (ie – 3.5 million deductible) is a tiny fraction of the revenue lost per the article on dropping the tax rate and also going with 3.5 million.
Absolutely True on all points. What ever fixes the congress is attempting it is becoming regressive under the overwhelming force of lobbyists and paid part of MSM where we recently had a grand example in health care reform(scam called by many). I am hoping for grid-lock in congress regarding so-called deficit commission which actually is doing the opposite of what its label indicates i.e. reliable savings of public in government bond gutting commission, gridlock regarding repeal of estate taxes exemption & gridlock resulting in progressive taxation. Gridlock is best hope and cannot expect better things like more progressive taxation we had in the past, removal of income caps in social security intake etc.
Estate taxes is one part of the two critical elements besides progressive taxation which enabled our country to rise to the fore-front in the world and be the only super-power because it forces every one to make their own fortune and most importantly create opportunities to make that fortune. Gridlock in the congress is the best hope in the current conditions.
Obama had years to prepare for, and act decisively, on any and all Bush tax cuts. He could have demanded a day-one Congress vote and law to sign to repeal the lot. That Rubin et.al. have anything to lie about at this stage is wholly due to Pelosi, Reid, Obama and their subjects. Let’s not forget who’s to blame here.