So far, the millionaires in the US Senate (probably a majority) have not recused themselves from considering estate tax legislation that could, depending on how they vote, save their own heirs hundreds of thousands of dollars in taxes – and possibly make a significant positive or negative difference in the federal budget deficit in the years ahead.
Their votes could potentially also slow or speed the drift of the nation toward an aristocracy of the wealthy.
Over the past three decades, the share of income going to the richest 1 percent has doubled, notes Chuck Marr, a policy analyst at the Center on Budget and Policy Priorities in Washington. The estate tax is "some check on the exponential growth of dynasties."
Last year the House voted to extend the estate tax at the 2009 level, as suggested by President Obama.
The amount of a couple's estate exempt from the tax would be $7 million, half that for a single individual. The rate on the taxable excess amount would be 45 percent. This would have hit 0.25 percent of all estates and perhaps 110 farm and small-business estates (though no one has yet found a family farm hit by the estate tax, the experts say). The actual effective tax rate on average for taxable estates would be about 19 percent, Mr. Marr reckons.
In the Senate, though, no bill achieved the 60 votes needed to avoid a filibuster and pass. So the estate tax expired this year, as planned under President Bush's 2001 tax-cut legislation. Next year the estate tax is scheduled to revert to the pre-2001 estate tax level of a $1 million exemption, at a 55 percent rate – unless Congress acts. That gives senators wishing to restore the tax, mostly Democrats, some leverage.
Two bills have been introduced.
A second by Sens. Bernie Sanders (I) of Vermont, Tom Harkin (D) of Iowa, and Sheldon Whitehouse (D) of Rhode Island would re-introduce the 2009 exemption level but have a more progressive tax rate going up to 55 percent for an estate worth more than $500 million. It would also be retroactive, so the estates of several billionaires who died this year would be hit. Uncle Sam would thereby get an extra $14.8 billion, the Joint Committee on Taxation projects.
Experts can only guess when the Senate will actually pass an estate tax bill.
If the Lincoln-Kyl bill passes it will reduce federal receipts by $385 billion over 10 years, estimates Marr. "That's a lot of money," he says.
A Boston College professor, Ray Madoff, is concerned about maintaining the restraint of a substantial estate tax on dynasties of wealth. The top 1 percent of Americans had 50 percent of the nation's wealth in the 1920s, 20 percent in 1976 after the GI bill and other measures boosted the middle class, and about 32 percent today.
She notes that the ever-more-popular creation of so-called "dynasty trusts" enable the rich to pass on their wealth not only to their children and grandchildren, but also to generations beyond – in perpetuity, and income-tax-free.
The nation, she says, is getting "dangerously close" to creating an aristocracy of wealth rather than a meritocracy.
• David R. Francis writes a weekly column.