A group of millionaires and billionaires on Tuesday pushed to expand the estate tax—levied on high-value assets when people die—beyond the levels sought by President Obama.
“A substantial estate tax can provide revenues at a time when our federal government badly needs additional revenues,” Robert Rubin, who served as Treasury secretary under President Clinton and is currently cochairman of Goldman Sachs, said on a conference call with reporters.
Rubin was one of the signatories on a letter sent on Tuesday to every member of Congress urging them to expand the tax. The letter and call were organized by Responsible Wealth, a project of the nonprofit group United for a Fair Economy.
The group said it was working with a senator's office to formally adopt the proposal and was in discussions to arrange a White House meeting with some of the letter's 36 signatories. Those signed on include investors Warren Buffett and Goerge Soros, who rank among the top 15 richest people in the nation.
Though the fate of upper-income tax cuts has made headlines in recent weeks, changes to dozens of other provisions, including the estate tax, also make up the fiscal cliff, a $500 billion combination of tax hikes and spending cuts that go into effect at the beginning of 2013.
Tax cuts enacted under President George W. Bush reduced the estate tax between 2002 and 2009 and eliminated it in 2010. It was reinstated in 2011 at a top taxable rate of 35 percent, exempting the first $5 million of assets—levels more favorable to the wealthy than in 2009. The exemption level will be lowered in 2013 to $1 million, ensnaring more people in the estate tax’s net, with the top taxable rate rising to 55 percent.
The Responsible Wealth letter proposes setting the exemption at $2 million per individual, indexed to inflation, with a rate beginning at 45 percent “and rising on the largest fortunes.” President Obama has proposed returning to 2009 levels—a flat rate of 45 percent, exempting the first $3.5 million of assets—which would raise an estimated $276 billion between 2011 and 2020, according to the nonpartisan Tax Policy Center.
Republicans and some notable Democrats are opposed to the idea, arguing that it amounts to double taxation, first as income and later through the estate tax. As recently as Monday, Sen. Orrin Hatch, R-Utah, called for the tax’s repeal.
“The death tax adds inefficiency to our economy,” the Senate Finance Committee ranking member said in a Senate floor speech. “It is what economists refer to as a dead-weight loss. In other words, it creates another burden on our free-market system that prevents the full potential of economic growth.”
While opponents often claim that the tax unfairly impacts small businesses and farms, the Tax Policy Center estimated in the summer of 2011 that it would apply to fewer than 50 estates that year.