Estate Tax Would Aid Privileged Few. Minimum Wage Hike: Many More

by Mike Hall, Aug 7, 2006

The Senate last Thursday blocked an incredibly obnoxious move to give a handful of the nation’s multimillionaire families a huge windfall by slashing the estate tax so deeply that it was close to a complete repeal. In a move that drew heavy criticism for its cynicism, Republican congressional leaders tacked a minimum wage increase onto the estate tax repeal, making the package a poison pill that stands in the way of minimum-wage workers getting a long-overdue pay raise.

Apparently, they thought workers would sit as expectantly as the family dog at the foot of the holiday feast table, waiting to lick a few splotches of gravy from the empty plates.

Exaggeration? Maybe not. Three new reports by the Center on Budget and Policy Priorities (CBPP) take a deep look at the wide disparity between those who would benefit from an estate tax cut and those who would gain with a minimum wage increase. The reports also delve into the continuing reduction in the estate tax for the past decade and just how little difference exists between the so-called estate tax “compromise” bill that was killed Thursday and earlier moves to slash or eliminate the estate tax.

In a state-by-state comparison of the number of Americans who would benefit from a $7.25-an-hour raise in the minimum wage versus how many gained from an estate tax cut in 2004, CBPP found:

• The estate tax reduction only affects the nation’s most well-off households, while the minimum wage increase would boost the earnings of some of the lowest-income workers in the country.
• Overall, some 5.6 million workers in the United States would benefit from a minimum wage increase, while only 30,000 estates had to pay taxes in 2004. In Louisiana, some 274,000 workers would benefit from a minimum wage increase, yet only 91 estates had to pay estate taxes in 2004 when the exemption stood at $1 million for individuals and $2 million for couples.
• When the current estate tax exemption hits its peak—$5 million for individuals and $10 million for married couples, only  0.3 percent of estates would face any tax burden at all—and those taxes would be significantly reduced from today’s tax rate.

During this latest fight over the minimum wage, the nine pay raises Congress has approved for itself while refusing for 10 years to give minimum wage workers a raise have caused outrage in the heartland. But CBPP points out in another report that in the same time frame, the estate tax has been reduced nine times.

• Congress has zealously protected the small number of wealthy estates subject to the estate tax, enacting legislation (in 1997 and 2001) that has reduced estate tax burdens in eight of the past nine years.
• House leaders have been extremely reluctant to allow any vote on a minimum wage increase but have held two votes on major estate tax reductions within the past six weeks and three votes during this session of Congress. This prioritization is especially striking, given that, even if Congress takes no further action, the estate tax exemption will continue to rise.

In another example of Republican word twisting, they termed the estate tax reduction in the most recent bill as a “compromise” from earlier attempts to either completely repeal or deeply slash the tax….That’s somewhat like a car dealer saying, “OK, let’s compromise, I’ll knock 10 bucks of the MSRP.”

CBPP says there’s not that much difference between this bill and earlier versions:

Joint Committee on Taxation estimates show that the new House proposal, unveiled the evening of July 28, would be just as costly over the long run.  While the new proposal phases in its estate tax reductions gradually so as to limit revenue losses in the first few years, the Joint Tax Committee estimates suggest that the long-term cost would amount to75 percent of the cost of full repeal, as compared with 76 percent in the case of the earlier House legislation…

The new House proposal is being presented by House leaders as being $15 billion less costly than the estate-tax plan that the House passed in June. Supporters point to new Joint Tax Committee estimates that show the new proposal would result in revenue losses of $268 billion between 2007 and 2016, as compared to $283 billion for the earlier bill. But even this small difference is deceiving, as it stems from a timing gimmick employed in the new legislation.

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