The Senate votes on estate tax repeal tomorrow. Nothing gets the political emotions flowing more than “tax cuts for the rich.” The Washington Post’s Harold Meyerson recently called repeal “estate tax lunacy,” for example. But let’s look at a few points made by the Washington Post in an editorial yesterday, which opposed repeal.
1) The Post says that the revenue loss from repeal would be too large—$776 billion over 10 years starting in 2012. But that’s less than two percent of expected revenues during those years. Besides the Congressional Budget Office says that under current law the estate tax will raise $45 billion in 2012 rising to $67 billion in 2016. Thus, the Post’s figure looks exaggerated. The source appears to be the left-wing Center on Budget and Policy Priorities. Harvard’s Greg Mankiw looks at the revenue impact of estate tax repeal in his blog.
2) Under estate tax repeal, the current tax exclusion of unrealized capital gains at death would be partly ended. Thus, the government’s revenue loss under repeal would be partly offset by rising capital gains tax revenue, as I discuss in my new bulletin.
The Post says that “Congress’s Joint Committee on Taxation has analyzed this claim [about the capital gains offset] and found it empty.” Actually, it’s a huge mystery what the JCT includes in its estate tax estimates, or any of its estimates. JCT’s official estimates have a huge impact on the debate over tax policy, yet its methods and assumptions are highly secret. The public cannot find out how the JCT is dealing with capital gains in its estimates. Even members of Congress usually can’t find out how the JCT comes to its sometimes suspicious-looking numbers.
As Mankiw and other experts have noted, estate tax repeal might not lose the government any money at all, but the JCT says repeal would lose the government $290 billion over 10 years (2006-2015). It’s absurd that Congress is making a crucial decision on tax policy tomorrow, yet we cannot have an open discussion regarding the budget impact with the taxpayer-funded experts employed by Congress.
Note that the Heritage Foundation recently published an excellent book on the issue of JCT secrecy