Legislation & Politics

Letter to Senators opposing H.R. 8 which would repeal the inheritance tax

June 6, 2006

Dear Senator:

On behalf of the 1.4 million members of the American Federation of State, County and Municipal Employees (AFSCME), I strongly urge you to oppose H.R. 8 which would repeal the inheritance tax.

Just a couple months ago, Congress approved the Deficit Reduction Act of 2005 slashing Medicaid, Medicare and student loans which are relied upon by the most economically vulnerable of our citizens. Congressional leaders argued these cuts were necessary due to the burgeoning federal deficit, but now these very same leaders are proposing to make the deficit worse by repealing the estate tax.

Here are the facts. Less than one half of one percent of estates now pays any estate tax whatsoever, and the number is falling. Under current law, the value of an estate exempted from taxation has increased from $1.35 million per married couple in 2000 to $4 million per couple in 2006 and will increase further to $7 million per couple in 2009. As a result, the number of taxable estates has dropped from more than 50,000 in 2000 to fewer than 13, 000 in 2006, and it will fall to about 7,000 in 2009. Currently, nearly half of all estate taxes are paid by the wealthiest 0.1 percent of estates — a few thousand families each year. Repealing the estate tax would result in multi-million dollar tax cuts to the heirs of our nation's multi-millionaires and billionaires, concentrating wealth and political power in fewer and fewer hands.

A recent Congressional Budget Office (CBO) study found that few farms and small businesses are affected by estate tax. The CBO study found that only 123 farms and 135 small businesses would have paid any estate tax in 2000 had the 2006 exemption level of $2 million ($4 million per couple) been in place. At the $3.5 million ($7 million per couple) exemption level that will be reached in 2009, fewer than 100 family-owned businesses and only 65 farm estates would have owed any estate tax at all. In addition, family farms and small businesses already receive special deductions, valuation schedules, and long-term payment options when taxed. As a result, practically no farm or small business is sold to avoid estate tax liability.

While it would affect very few Americans, total elimination of the estate tax would impose enormous costs on everyone else. It would reduce federal revenue by nearly $1 trillion over the next 20 years, adding to the already enormous and growing federal deficit. This revenue loss will be made up by raising taxes on lower- and middle-income taxpayers and/or by cutting essential services. Moreover, repeal of the estate tax would have a devastating impact on charitable giving to colleges, hospitals, museums, land conservancies, and organizations that assist the poor and disadvantaged.

H.R. 8 is not needed. I urge you to vote against this special interest legislation that benefits only the very wealthiest in our society.


Sincerely,
Charles M. Loveless
Director of Legislation
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