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NATIONAL CENTER FOR POLICY ANALYSIS
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The Disingenuous Opposition to Estate Tax Repeal
Daily Policy Digest

Tax Issues / Estate Tax

Wednesday, July 03, 2002
Many senators voting against permanent repeal of the estate tax cited "fiscal responsibility," saying it would immediately "cost" the federal government $740 billion -- but that's not the case.

  • Opponents seldom mentioned the changes in the law wouldn't occur until 2011.
  • The widely cited $740 billion revenue loss is an aggregate figure for 2013 to 2022.
  • The reason this is an issue at all is because Senate rules prohibited enactment of a permanent tax cut last year without a 60-vote majority -- and supporters didn't have it, settling instead for a 10-year phase-out.
  • Because the repeal couldn't be made permanent, it reemerges in 2011 as if it had never been repealed.
Finally, the $740 billion figure comes not from the Treasury Department or the Congress, but from a vigorous opponent of estate tax repeal, the Center on Budget and Policy Priorities (CBPP). It's methods are instructive.

  • CBPP took government estimates of how much revenue would be lost in 2012 if estate tax repeal is made permanent and assumed this impact would be the same in future years as a share of GDP.
  • It then made assumptions about the growth of Gross Domestic Product from 2012 to 2022 and got $740 billion.
  • But Congressional Budget Office figures show over the same period GDP will be about $230 trillion and federal revenues around $50 trillion -- putting the "huge" revenue loss from estate tax repeal in context.
Finally, opponents fail to take into account that a significant amount of revenue loss from estate tax repeal will be recouped through higher capital gains taxes over time -- perhaps two-thirds of revenue expected from the estate tax.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, July 3, 2002

For text
http://www.ncpa.org/edo/bb/2002/bb070302.html

For more on Estate Tax
http://www.ncpa.org/iss/tax
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