This blog post also appeared on Huffington Post.
Who deserves a break more these days: a struggling working family, or the heir to a billion-dollar fortune? According to the Republican majority in the U.S. House of Representatives, it’s the billion-dollar baby.
Recently, the House voted for a budget that would end tax credits for many working families that put $1,000 a year in their pockets, on average. The Republican budget also would cut $5 trillion in funding for benefits and services that make groceries, health care and college more affordable, pay for road improvements, and invest in scientific research.
Adding insult to injury, House conservatives plan to eliminate the estate tax, which is paid only by multi-millionaires and billionaires. An estate has to be worth at least $5.4 million before a dime in taxes gets paid. If the estate is passed on by a couple, it has to be worth nearly $11 million.
Repeal would hand elite households a $3 million tax break, according to the Congressional Joint Committee on Taxation (JCT).
Misguided budget policies like these are a big source of our nation’s widening wealth gap. Not only do they pad the bank accounts of the already wealthy, but they starve the benefits and services that help the rest of us get by, and if we’re lucky, get ahead.
Abolishing the estate tax — which only affects the wealthiest two-tenths of one percent of families, or one household in 500 — will cost us $269 billion over the next 10 years, the JCT estimates.
For $269 billion, we could replenish the fund that maintains our highways and transit systems, which faces a $164 billion shortfall over the next decade, and let every low- to moderate-income 4-year-old attend a good preschool ($75 billion).
Or, for $269 billion we could send 9 million striving Americans to community college tuition-free at a cost of $60 billion; keep college affordable for millions more byreversing proposed budget cuts to Pell Grants ($89 billion), which help pay for tuition for needy kids; and ensure there’s enough food on the table for children, seniors, veterans and their families by restoring $125 billion in cuts to food stamps made in the Republican budget.
Not only does the estate tax raise essential revenue, but it’s also the only federal levy that curbs the growth of huge inherited fortunes. America thinks of itself as a classless society, but the nation’s richest one-tenth of one percent holds as much wealth as the bottom 90 percent combined, according to a recent academic study. Translation: 120,000 households own as much stuff as 110 million families.
Polls show Americans of all political stripes know the tax system is rigged in favor of the wealthy. Last month the Pew Research Center found that 79 percent of us believeupper-income taxpayers don’t pay their fair share. The estate tax directly addresses this urgent concern by exclusively affecting the rich.
Unfortunately, conservatives use all the dirty tricks at their disposal to misinform the public in order to undermine support for the estate tax.
They call it the “death tax” to imply every family losing a loved one pays it. But, 99.8 percent of American families are untouched by the estate tax.
Opponents claim families are forced to sell farms and small businesses to pay the tax. In fact, no family farm has ever been sold to pay the estate tax. Of the millions of small businesses and small family farms, only 20 paid any estate tax in 2013, according to the Tax Policy Center.
They complain the 40 percent estate tax rate is too high. But because of exclusions and credits, the effective rate is less than half that — just 17 percent.
Tax Day reminds us that our tax system favors the wealthy and well-connected. The estate tax is the rare exception. Rather than eliminate it, the estate tax should be strengthened. It is essential to narrowing the wealth gap and widening opportunity for all.