As Obama touts Buffett tax, progressive ‘death’ tax comes under national siege
As President Barack Obama canvasses the United States pushing for an increase in taxes on the wealthy — something he is calling the Buffett tax, after billionaire progressive Warren Buffett — the campaign against the “death” tax is gaining momentum both on the state and federal level.
The recent trend against the estate and inheritance taxes, favored by some of the same progressives who champion the Buffett tax, began in Ohio and has spread to Indiana, Tennessee, North Carolina, Oregon and Nebraska Tax activists also hope to make gains in Minnesota and Maine.
Twenty-two states collect such taxes — either an estate tax, which is automatically levied on a dead person’s assets, or an inheritance tax, which is collected when the beneficiary of a bequest receives money or property.
In the Democrat-controlled Senate, Republican John Thune has introduced the Death Tax Repeal Permanency Act to abolish the federal estate tax. That bill follows on the heels of identical legislation launched in the House of Representatives last year — with more than 200 cosponsors from both sides of the aisle — by Texas Republican Kevin Brady.
Right-leaning activist organizations, think tanks and supply-side economists are also mobilizing, including the American Family Business Institute trade association. With seven months to go before the November election, 203 House and Senate candidates, as well as presidential candidate Mitt Romney, have signed its “Death Tax Repeal Pledge.”
“It’s like a backlash against President Obama,” AFBI communications director Charles Chamberlayne told The Daily Caller. “Even today, while he’s out promoting the Buffett tax, it’s really coming to a head. I’m expecting something to happen pretty soon, because the president is starting to push back on it. It’s the anti-Buffett-rule tax.”
The estate tax has become a favorite villain for supply-side economists, who maintain that by taxing Americans’ savings after they die amounts to double taxation and removes incentives for saving instead of spending. Sole proprietorships and other small businesses, they say, lack the tools to protect their assets like their big-business competitors can.
Proponents of the federal estate tax argue that it is an important source of government revenue and a blockade against the development of an American ruling class. (RELATED: Fareed Zakaria: Americans should give half of inheritance to government)
In July 2011, Ohio Republican Gov. John Kasich signed a law repealing his state’s estate tax. That law will take effect at the beginning of 2013. Last month Republican Gov. Mitch Daniels followed suit in Indiana, signing a bill that slashed estate taxes there and moved the state toward eventual repeal over ten years. (RELATED: Indiana set to repeal death tax)
In Tennessee, pressure from advocates and GOP majorities in the state house has pushed an initially hesitant Republican Gov. Bill Haslam to embrace inheritance-tax repeal.. Opponents of the tax plan to shift their focus next to North Carolina, home of a Republican-controlled state house and the lame duck Democratic Gov. Bev Perdue.
Though activists expect a veto from Perdue, they predict success in 2013.
“Once a few states get rid of the death tax, it becomes an argument in other states in terms of being competitive,” AFBI federal affairs director Palmer Schoening told Forbes magazine in a March interview. “Capital is really mobile, and people are too.”
Schoening told TheDC that “with Tennessee repealing, the pressure is on North Carolina.”
“They put themselves out as a state for retirees; they pride themselves on senior communities. Their competition is Florida, which has a constitutional amendment against the death tax, and once Tennessee passes repeal, North Carolina will no longer border any state that maintains one.”
In Oregon, repeal advocates are on track to put the largely unpopular tax to a public vote in November. Early grassroots efforts and fundraising have supporters positive they will meet the July 6 signature deadline to get the issue on November ballots. Polling already indicates they will succeed.
Estate tax opponents are more skeptical about Buffett’s home state of Nebraska. While Republican Gov. Dave Heineman favors a repeal, county officials — the primary recipients of funds from the estate tax — have come out in opposition. (RELATED: Death tax showdown heads to Warren Buffett’s home state)
“County officials should not depend on dead people’s money to fund their activities,” Schoening told TheDC in January. “Repealing the state’s inheritance tax will help family businesses and farms expand and add more jobs.”
According to a 2009 study by former Congressional Budget Office director Douglas Holtz-Eakin, repealing the federal estate tax would create more than 1.5 million small-business jobs, reducing unemployment by approximately 1 percent.
“Consider that 1.5 million jobs are nearly half of the total jobs that the Obama administration hopes to ‘save or create’ under its recently announced budget plan,” Holtz-Eakin wrote. “This study suggests that simply killing the estate tax could bring them nearly half way to that goal.”
Although Democratic control of the U.S. Senate and White House makes repeal of the federal estate tax highly unlikely, activists and politicians who oppose the tax have worked to force both Democrats and Republicans to choose sides on the issue, particularly in key battleground states.
In what promises to be a close and expensive Montana U.S. Senate race, Rep. Denny Rehberg has made repealing the tax a visible issue. Rehberg has signed AFBI’s pledge. Incumbent Democratic Sen. Jon Tester has not.
In Nevada, Republican Sen. Dean Heller is touting his signature on the AFBI pledge and his co-sponsorship of the Senate repeal bill. Heller’s likely opponent, Democratic Rep. Shelley Berkley, favors a 35 percent federal estate tax.
“Consistently 70 percent of voters favor complete repeal,” Schoening told TheDC.
“Countries compete for business and jobs the same way that states do, and with the third-highest death tax in the world, eventually the federal government will be forced to follow the states’ lead to remain competitive in the global economy.”