One problem with talking about the “Bush tax cuts” is that they incorporate much more than just the individual income tax marginal rates. Among other things, you have the changes to the estate tax. And so today, House Democrats plan to introduce an estate tax measure that would freeze the tax at 2009 levels.
In their release, Ways and Means Democrats said their proposal, which would increase the top estate tax rate back to 45 percent and lower the exemption to $3.5 million, would shield 99.7 percent of estates from any liability.
The current top rate is 35 percent, with a $5 million exemption, indexed for inflation after 2011. Unless Congress acts, the estate tax will revert to a $1 million exemption and a 55 percent top rate.
House Republicans have prepared a bill that, much like a similar GOP proposal in the Senate, would continue the current estate tax parameters for another year. The House is expected to vote on that measure next week, as well as an alternative modeled after the Senate Democratic package.
What House Democrats won’t tell you is that the 2009 levels are the lowest of the 10-year Bush-era changes to the estate tax. Under Bill Clinton, the estate tax had that 55% top rate and $1 million exemption. The thresholds gradually rose and the rate gradually dropped, and then the estate tax disappeared in 2010, before the deal in the 2010 tax cut deal created the new, $5 million exemption.
So what House Democrats are actually proposing is a cut in the estate tax from current law, as the tax would have reverting back to the Clinton rates. As they note, almost nobody pays the estate tax, and that was true under Clinton as well. So this is a complete handout to wealthy scions of privilege.
This is not the only manner in which the Democratic tax cut deal, though sold on the idea of higher taxes for the wealthy, actually cuts taxes for them. For one, it extends tax cuts on the first $250,000 of income for everybody, including the rich. That’s roughly a $10,000-$12,000 tax cut for the top one percent of all earners. In addition, as Josh Harkinson points out, Democrats have pushed forward other tax cuts for the rich. Here’s another example, on capital gains and dividends:
The main reason that Mitt Romney paid an effective tax rate of just 13.9 percent in 2010 was that most of his income was taxed at the capital gains rate, which Republicans under George W. Bush had slashed from 20 percent 15 percent. He also benefited from a Bush-era reduction in the tax rate on corporate stock dividends to 15 percent from a much higher top rate of 39.6 percent. President Obama wants to partially reverse those changes, applying the higher pre-Bush rates to all capital gains and corporate dividends income that falls into the top two tax brackets. But Senate Democrats wussed out, passing a bill with much smaller increases in those tax rates.
Democrats will only carry forward the time-honored tradition of patching the alternative minimum tax, which will relieve the tax burden on the upper middle class and above.
So while the rich will pay more under the Democratic tax cut plan, compared to their tax burden under Bill Clinton they will pay quite a bit less. Democrats will not roll back the Bush tax cuts for the rich entirely, with the implicit assumption that those tax rates were too high. That’s highly debatable, since they occurred under a time of relative prosperity.




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Lord knows the rich deserve all the help they can get.
which lord are you talking about?
is he one of the litany of lords in england?
lord of the flies?
lord of the rings?
lordy lordy?
I see david is still giving bush credit for the obama tax cuts, I think he guesses if he adds some “quotation marks” he gets a pass
The Lord that created so many David Dayens, all blogging on FDL!
Democrats: WE SUCK LESS! WE SUCK LESS!! WE SUCK LESS!!!
oye
I know a catch 22 when I see one
oye
Hoover, not Dyson. Hoover, not Dyson.
Yeah, we are always picking on them. Poor babies.
David, please refrain from describing them as the “Bush Tax Cuts”. They were designed to sunset in 2010 (I think), so for the sake of accuracy they are the Obama Tax Cuts. That avoids the appearance of partisanship, which is a form of mental illness.
The more money THEY have, the more money THEY have.
No, that’s not right. Where did I go wrong?
JACK Lord??????
Nail + Head.
Why wouldn’t they. Most of them are rich themselves and travel in the same social circles as the neo-fascists.
True story. When my mother died, that was the first time I realized that the inheritance tax is practically nonexistent. If you believe the media and the right-wing bleating about a fictional “death tax,” you have no way of knowing the truth.
Lest we forget, the majority of democrats in Congress ARE the wealthy!
They are the face the neo-fascists present to the public.
It’s the 1%ers making laws that benefit the 1%ers. Why are we surprised at the outcome? And why are people voting for them again and again? Gosh, I wonder why our congresspeople stonewalled when asked to show their own tax returns?
If tax laws were really fair, I wouldn’t care if there wasn’t an estate tax. No one should pay tax on amounts of money that they have previously paid taxes on.
But the problem is that the UBER RICh don’t even pay taxes the first time around. The Estate Tax has become the only way to get anything from these people.