Estate Tax Debate
[Sorry, the video for this story has expired, but you can still read the transcript below. ]
KWAME HOLMAN: For more than 20 years, the Washington Redskins football organization was the crown jewel of a family-owned empire. But when owner Jack Kent Cook died three years ago, he left the to Redskins not to his son, John, but to a tax exempt charitable foundation. By doing so, Cook reduced dramatically the amount of taxes his estate to have to pay. However, it left son John in a bidding war to try to buy the team back and keep it in the family. Cook lost.
REP. DENNIS HASTERT: This is not a political issue this doesn’t go along political lines, this crosses across all types of lines. Anybody who wants to build something to pass on to the children it affects.
KWAME HOLMAN: Although it’s commonly referred to as the estate or inheritance tax, Congressional Republicans, intent on repealing it, now call it the death tax. And yesterday they recruited the grim reaper, and the owner that of a small business to help illustrate their arguments.
MARK SINCAVAGE, Small Business Owner: 1989, when my father passed away, we paid our first round of death taxes. Then in 1998, my mother died. After spending $80,000 on attorneys, accountants, and appraisers to prepare to file the death tax return, my brothers and sisters and I realize we were we facing a tax bill of over $600,000. This is on a modest business that employs just four people and whose assets are not in cash but in land and equipment.
KWAME HOLMAN: Currently, the estate tax is levied a escalating rates at up to 55% on estates valued at more than $650,000. It generates about $30 billion a year in federal tax revenue. This morning, House Republicans made repeal of the estate tax the main business of a rare Friday session.
REP. SUE MYRICK, (R) North Carolina: Taxes oil, taxes notes, taxes cash. If he hollers, tax him more. Tax him until he’s good and sore. Tax his coffin, tax his grave, put these words upon his tomb: Taxes drove me to my doom. After he’s gone, he can’t relax, they’ll still go after death tax.
KWAME HOLMAN: Republicans complained estate taxes are decimating all segments of society.
REP. DON MANZULLO, (R) Illinois: Mr. Speaker, I was there when the auctioneer’s gavel fell and sold half the family farm of a couple that I represented in Ogle County, Illinois as the kids sat there and wept. Let’s not talk about the Bill Gates and the Steve Forbes. Lets talk about those people. Farm people, losing their farms because government wants more money to spend on more programs.
REP. LINDSEY GRAHAM, (R) South Carolina: You lose family farms in my district in droves because people are land rich on paper and cash poor; you lose the small business that can’t go to the next generation to get less than 2%, the monkey with the money up here. Philanthropy is lost. The human spirit is suppressed. Most people want a legacy; they want to give something back, a library, a hospital wing, a donation to their church. This is a form of socialism that must go.
KWAME HOLMAN: Most Democrats, however, argued that only the richest 2% of estates even pay the tax
REP. BARNEY FRANK, (D) Massachusetts: I think if we were giving advice for the single-worst idea to come forward from a group that’s been rife with them, it would be this: The idea is this: Let’s make the tax code of America better for very rich people; let’s give substantial tax relief to the richest people we can find. Forget about the person making $40,000 a year and paying Social Security payroll tax. Forget about all those other people paying income tax; we’re here to give tax relief to the richest 2% of America.
REP. SANDER LEVIN, (D) Michigan: I have no hesitation to go back to my district and to talk about what the impact of this repeal would mean for 98% of my constituents — 98%. I’ll talk about your coming here yesterday and not being able to fund Head Start, your not being able to fund training, and you’re going to give, ten years from now, a $50 billion tax cut to the very wealthy in this country? I’ll take that battle on anytime.
REP. CHARLES RANGEL, (D) New York: Do you really say that the answer to this problem– and it is a problem– is to repeal, to repeal the estate tax completely?
KWAME HOLMAN: Democrats instead proposed reducing estate tax rates by 20% and raising the tax-free inheritance threshold to $4 million.
REP. CHARLES RANGEL: Under the Democratic alternative, the Republicans would be hard put to see whether any rancher, any farmer, any small business will be lost as a result of the $4 million exemption. I say “exemption,” which means that they don’t even have to think about the reduced rate of taxes. Every estate planner knows that we have a better alternative; they know we take care of the problem, but we don’t take care of the multibillion dollars at stake. That’s what we don’t take care of.
KWAME HOLMAN: Nonetheless, this afternoon the House defeated the Democratic plan to reduce estate taxes, and then, with the support of 65 Democrats, it approved overwhelmingly the Republican plan to repeal the tax, but the vote fell 11 votes short of the number needed to override a promised veto by President Clinton. The estate tax repeal now awaits action in the Senate.
JIM LEHRER: Now, Shields and Gigot with analysis of this and other things political. That’s syndicated columnist Mark Shields, and “Wall Street Journal” columnist Paul Gigot. Paul, who’s got the best side of the argument on this estate tax?
PAUL GIGOT: This is an easy one, Jim. I think the tax-cutters do, and 65, 65 House Democrats, one-third of the Democrats in the House, seem to agree. Some of the wisest American political analysts, some of them even at this table, have said that tax-cutting isn’t popular. It seems to be popular in the House. When you can identify a specific tax that people don’t like, and this is one that was designed for the Rockefellers, for the Carnegies in 1916, to fund World War I, but now it’s beginning to hit small business people, real estate holders, a lot of people well down the income scale who just spent a life building assets. Suddenly they get hit with a 40%, 50% tax rate. And this is why a lot of the Democrats – they’re hearing this in their districts.
JIM LEHRER: And you think there is public support for eliminating it altogether?
PAUL GIGOT: I believe there is. I talked to Neil Abercrombie, a Democrat from Hawaii, who’s nobody’s conservative, let me tell you. I mean, he goes right down with labor and all things. He calls himself a labor Democrat. He said, “look, this is an issue which I hear more about than any other. We’ve got a lot of landowners and a lot of small business people in Hawaii. They want this cut.”
JIM LEHRER: Mark, how do you read it?
MARK SHIELDS: Jim, forgive me while I pause to wipe a tear away for the case that Paul has made.
JIM LEHRER: Come on. Pull yourself together.
MARK SHIELDS: 1.9% of all estates– that’s all deceased people in the United States and what they leave behind– are eligible for taxation. We are not talking about mom and pop.
JIM LEHRER: Because they don’t make enough money.
MARK SHIELDS: They don’t make enough money. They do not leave enough. We’re not talking about… We’re talking one out of 25 farms. I mean, to listen to this, you think it was everybody in overalls coming in from the west 40 on the tractor, and the IRS was there to take everything away.
JIM LEHRER: That’s because the exemptions…
MARK SHIELDS: The exemptions for farmers, the exemptions cover them, and frankly, they don’t qualify. Usually when a case is made for a tax cut, it says– and Paul makes the case very well– “this is going to be an incentive, it’s going to reward certain activity, it’s going to lead to great economic stimulus.” This is just the opposite of it. I mean, what it’s basically saying now is “Steve Forbes, erstwhile presidential candidate, my goodness gracious, Steve should be able to take the whole kit and caboodle.” I don’t know what’s going to make him a better person. I don’t know where you’re going to get $50 million.
PAUL GIGOT: I admire Mark on the insight for human incentives. Some people do actually work to spend something other than to spend all the money on themselves– maybe a little bit for the kids and grandkids, or leave a little bit to somebody else.
MARK SHIELDS: And, quite frankly, and I think Paul would acknowledge this, if, in fact, this is adopted, then charitable giving, which is considerable at the time of departure in the estates that are capable of doing so, will be cut dramatically.
JIM LEHRER: That’s because they’ll leave it to their families rather than to…
MARK SHIELDS: And it’s exempt.
JIM LEHRER: Which they do now because they can’t give so much of it.
PAUL GIGOT: He’s assuming all these people are somehow horribly greedy, that they don’t want to give it. Individuals do give money away, too.
JIM LEHRER: How do you count the votes on this? This was a pretty good vote. Is there enough out there to override a veto?
MARK SHIELDS: I think obviously if George Bush wins, it will become reality.
JIM LEHRER: In other words, it will just keep coming back.
MARK SHIELDS: But I do think the President has enough votes right now. Let’s be quite fair to the advocates. They have come up with a great phrase. It’s like “right to work”– “the death tax.”
JIM LEHRER: Death tax.
PAUL GIGOT: Very close to veto strength in the House. In the Senate, there are eight Democrats who are on the Kyle bill to cut this, but I think Tom Daschle is going to bottle it up, if he can, to make sure it never gets to the President’s desk.
JIM LEHRER: Patient bill of rights, Mark: That hasn’t gone anywhere. What happened? I thought that had been –I thought the political momentum out in the country was for that.
MARK SHIELDS: I think what we’re seeing, Jim, is two things. First of all, the issues agenda for this election is totally in the Democrats’ favor. I mean, patients’ bill of rights, Medicare, health care, Social Security, education: Historically, traditionally strong Democratic issues, where voters have turned to the Democrats as the party better qualified, better suited to address those problems. What makes it fascinating, even with that issue set favorable to the Democrats, is that George Bush is either tied or ahead in virtually every poll. I think this is one where the Republicans know it’s a loser for them. I think it’s an advantage to the Democrats to have this as an issue going in the fall, because it’s one where they are very much on the offensive.
JIM LEHRER: Do you see it that way?
PAUL GIGOT: Well, it’s a tough one. HMO’s are not popular, there’s no question about it. You have Denny Hastert, the Speaker of the House, who wants a bill, frankly, he really does want to get something out so they can claim it as an accomplishment, and they won’t have it at risk for some of these incumbent members. But you have the Senate Republicans– Don Nichols– two- thirds of whom are not up. They’re not going to feel as vulnerable. They’re acting more here on the principle of the thing, which is they don’t want to give in on…
JIM LEHRER: The right to sue.
PAUL GIGOT: On the right to sue, and the scope. They don’t want to have double jurisdiction, federal and state.
JIM LEHRER: We want to go on to the presidential campaign. Before we do, the secret money thing in the News Summary a moment ago, the House turned it down today. What’s going on on this issue?
PAUL GIGOT: I think there’s less here than meets the eye. You’re talking about a very narrow disclosure item. It used to be people were talking about reform, banning all soft money, before that, public financing. Now we’re down to a very narrow vote over disclosure. I think it was an attempt in the Senate to embarrass Tom DeLay. One of his allies had set up one of these accounts.
JIM LEHRER: Is it working?
MARK SHIELDS: Paul is wrong. It’s something I very rarely say. This was a significant vote, Jim. The agenda was lost by the Republican leadership in the Senate. John McCain introduced a bill yesterday with no knowledge of Common Cause, any of the groups supporting it, anybody in the Senate, introduced a bill, out-maneuvered both Mitch McConnell and Trent Lott, and went to a vote, and to a vote that got the support… This is these 527– it’s a tax loophole– millions of dollars given. We don’t know where it comes from, as John McCain said in Kwame’s excerpt, we don’t know where it goes, we don’t know how it’s being spent, anything of the sort.
JIM LEHRER: And this would close it.
MARK SHIELDS: This would close it, and John McCain had the support of Conrad Burns of Montana, Republican conservative Senator, Spence Abraham from Michigan in a tough race, of Kay Bailey Hutchison, who’s up in Texas, of Mike DeWine, who’s up in Ohio, all these Republican Senators who have no particular record or affinity on campaign finance reform, in fact, none of them had ever voted for McCain before, all of a sudden breaking; broke in the House today, Bob Franks, Republican nominee for the United States Senate from New Jersey on Tuesday. Today in the House, he voted with the McCain proposal there.
JIM LEHRER: So it didn’t nudge.
MARK SHIELDS: The Republican leadership -
JIM LEHRER: They said they would bring it back.
MARK SHIELDS: They were forced to come back with a bigger deal, and they promised to vote in two weeks.
PAUL GIGOT: And they’re going to come up with, I think, a larger disclosure bill that covers some of the people who weren’t included in this, like the trial lawyers and organizations whose issue ads would not have been covered.