Estate tax giveaway

CAN THE country ever have an intelligent conversation about the estate tax? It won't if the Republicans in Congress keep up their propaganda about the ``death tax" that is supposedly forcing the families of deceased farmers off the land. The proposal to reduce the estate tax is secondary to the principal issue, which is that wealthy Americans have already received excessive tax cuts.

The Senate is considering a so-called compromise proposed by Jon Kyl, Republican of Arizona, that would permanently lower the estate tax to 15 percent, the same as that charged to long-term capital gains. The estate tax now stands at 46 percent on estates over $2 million ($4 million per couple). It would rise to 55 percent on estates of more than $1 million at the end of 2010, when many of the tax cuts sought by President Bush expire.

The Congressional Budget Office has laid to rest the myth that the tax, if not repealed, will impoverish farmers' heirs. In 2000, according to the CBO, 5,308 filed estate tax returns, but 92 percent of these had enough liquid assets to pay the tax without selling land. Through various quirks in the tax law, there are enough ways for most wealthy people to minimize their exposure to the tax.

Even at 55 percent, the tax should not generate much sympathy for the heirs. In life, wealthy taxpayers have reaped a windfall from the Bush administration and its allies in Congress. According to the CBO, under Bush the effective income tax rate for the top 54 percent has declined from 21.6 percent to a projected 19.3 percent for this year. And of special importance to the wealthy, tax rates on dividends have dropped from as much as 39.5 percent to 15 percent, and on capital gains from 20 percent to 15 percent.

Unlike most of the big tax cuts, which were pushed through by simple majority under the Senate budget rules, Kyl's estate tax plan will require the support of 60 senators to come to a vote. It will probably not prevail. And there are probably not enough votes in the Senate to repeal the tax outright. But income, dividend, and capital gains tax cuts all expireover the next few years, and Congress will have to decide whether to make them permanent. It might consider a more reasonable compromise on the estate tax as part of that package.

With the huge deficits generated by Bush, many members of Congress are aware that the tax system is not providing enough revenue to pay for the obligations of the federal government. Taxes need to be raised, and the wealthy could easily endure the higher rates under which they prospered during the Clinton administration. The ``death tax" shouldn't be slashed until Congress devises a better fiscal policy for the living.