Rivals in estate tax fight are calling on lawmakers to move on restoration

Anti-poverty advocates, business groups and unions all realize it’s now or never for Congress to move on restoring the estate tax.

With the August recess looming, both sides of the debate are calling on lawmakers to act now on the tax. Lawmakers will return to Capitol Hill in the fall, hesitant to take a potentially toxic vote so close to the midterm elections on what could be termed a tax increase.

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The estate tax — which has lapsed since the beginning of the year — will return in 2011. It will be at its highest rate in 10 years, with a tax rate of 55 percent. Those with assets worth less than $1 million at the time of their death will be exempt. 

In 2009, the estate tax was taxing estates at a rate of 45 percent. Those with assets valued at less than $3.5 million were exempt. 

United for a Fair Economy, an anti-poverty group, is lobbying for the estate tax to be restored to 2009 levels. It has found high-profile supporters, too. On a conference call organized by the group Wednesday, AFL-CIO President Richard Trumka and former Treasury Secretary Robert Rubin came together to support reinstating the tax. 

When asked why they both support restoring the tax despite past differences, Trumka joked, “The reason we agree is, Bob has finally seen the light.”

Rubin and Trumka have often clashed, with labor leaders warning Democrats to distance themselves from the free-trade policies advocated by Rubin and other Democrats with ties to Wall Street. During the 2008 presidential campaign, Trumka presented a slideshow to union members arguing it was “hard to tell the difference” between the policies of Rubin and then-Treasury Secretary Henry Paulson, who served under a Republican president.

Both Rubin and Trumka said restoring the tax would be “sound policy.”

“You would actually increase demand, not decrease demand, if you restored the estate tax immediately,” Rubin said. 

Trumka said the government revenue could be used as aid to state and local governments or infrastructure projects as well as for reducing the deficit.

“Anyone who is for deficit reduction but is opposing reinstating the estate tax is clearly residing on a different planet than working people who are struggling in this economy right now,” Trumka said.

Concerned that a more burdensome estate tax could be imposed, business associations as well as trade groups for ranchers and farmers have gotten behind a compromise bill sponsored by Sens. Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.). 

That proposal would institute a tax rate of 35 percent and an exemption level of $5 million for the estate tax. 

In a letter Tuesday to senators, the Family Business Estate Tax Coalition (FBETC) asked that the Lincoln-Kyl measure be attached to a small-business lending bill that is likely to move through the Senate. 

The coalition is typically for full repeal of the estate tax, but such a bill would receive little support in a Democratic-controlled Congress.

“The goal of the FBETC has always been full repeal of the estate tax, and we still believe this is the best solution to protect all family-owned businesses from the estate tax. While we understand that full repeal may not be immediately possible, the FBETC supports the parameters outlined in the Lincoln-Kyl proposal,” the coalition letter says.

Members of the coalition include the American Farm Bureau Federation, the National Federation of Independent Business and the U.S. Chamber of Commerce.

Trumka described the Lincoln-Kyl proposal as a weak compromise that he could not support, and the measure is unlikely to win the votes of liberal Democratic senators. 

He favors legislation sponsored by Sens. Tom Harkin (D-Iowa), Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.) and Sherrod Brown (D-Ohio). 

Their bill would reinstate the estate tax at 2009 levels but include a more progressive tax rate. For example, it would tax estates worth $3.5 million to $10 million at 45 percent; estates worth more than $10 million and below $50 million would be taxed at 50 percent; and estates worth more than $50 million would be taxed at 55 percent.