AFBF Releases New Report: Super Committee Deficit Mandate Could Be Reduced by Over 30% with Federal Estate Tax Repeal

Congress’ new Joint Select Committee on Deficit Reduction has been tasked with slashing a minimum of $1.2 trillion from the projected federal budget deficit over the next decade and pressure is already mounting for the so-called “super-committee” to include higher estate taxes as part of its plan. 

But a new report released today by the American Family Business Foundation (AFBF) shows that repealing the federal estate tax would do more to reduce the deficit than increasing the tax, generating enough new revenue to cover just over 30% of the $1.2 trillion in deficit reduction required by 2021. The study was conducted by tax policy expert Stephen J. Entin, the president of the Institute for Research on the Economics of Taxation, and a former deputy undersecretary of the Treasury. 

Entin’s analysis examined the revenue-generating potential of various estate tax exemptions and rates.

Support for higher estate taxes in the name of increasing government revenues or reducing deficits is based on the unrealistic theory that every dollar not collected by the Treasury is a dollar lost – what economists dub “static” loss, Entin explained.

In the real economy, however, that same dollar, if not claimed by government, is often invested in new equipment, employees, or technology intended to increase a company’s revenue. As companies grow, they produce more revenue for government as well. It is this “dynamic” activity that Entin reviews in his AFBF report, “Estate Taxes, Deficits, and Budget Implications”.

“This dynamic method demonstrates that the estate tax reduction would significantly lower, not raise, the federal deficit, and shows that the potential gains in GDP are substantial,” said Entin. 

When compared to the various estate tax rate and exemption combinations being recommended by members of Congress, Entin calculates that repeal is by far the best policy option.  Across a 10-year budget window – 2012 to 2021 – he finds that repeal of the federal estate tax would:

•cover 30.18% of the $1.2 trillion in deficit reduction required of the Super Committee by 2021;

•reduce the total budget deficit by 5.19% over the period and by 11.49% in 2021;

•lead to a 2.26% increase in GDP ($538 billion) by 2021, for a cumulative gain of nearly $3 trillion over the period, compared to what would have happened under current law;

•increase federal revenues over the 10-year period by about $362 billion (compared to current estate tax law); by 2021 the annual gain would be about $88 billion per year.

The chart below shows the positive impacts of Federal Estate Tax repeal:

According to AFBF President Dick Patten, “Elimination of the estate tax is as close as one gets to a free lunch in economics. It is time to take advantage of it.”

Tags: afbf, death tax, entin, estate tax, super committee

Super Committee Announcement Updated, 2 Pledge Signers Included

After the budget deal passed on August 2nd, the focus has shifted on to the selection of the twelve members that will sit on the bipartisan Joint Select Committee on Deficit Reduction. The 6 members from the House- 3 Democrats and 3 Republicans- and 6 members from the Senate will establish a plan to cut the federal deficit by $1.2 trillion, or more, over the next 10 years. It is clear that the budget debates are not over; by Thanksgiving, an agreement on spending cuts to federal programs, or new revenue sources, will be proposed. If no deal is adopted, or if the agreement is voted down by either house or vetoed by the President, before November 23rd, across-the-board cuts will be implemented from defense (50%) and non-defense (50%) spending.

The Senate and Republican selections for the “super committee” have been announced; the following delegates were selected:

• Sen. Pat Toomey (R-PA)
• Sen. Rob Portman (R-OH)
• Sen. John Kyl (R-AZ)
• Sen. Patty Murray (D-WA)
• Sen. Max Baucus (D-MT)
• Sen. John Kerry (D-MA)
• Rep. Jeb Hensarling (R-TX-5)
• Rep. Dave Camp (R-MI-4)
• Rep. Fred Upton (R-MI-6)
• Rep. Chris Van Hollen (D-MD-8)
• Rep Jim Clyburn (D-SC-6)
• Rep. Xavier Becerra (D-CA-31)

We are pleased to announce two of the members are Death Tax Repeal Pledge signers, and a majority of them have voted with us in the past. Senator Pat Toomey from Pennsylvania and Representative Fred Upton from Michigan signed the Death Tax Repeal pledge during their 2010 campaigns and have been very supportive of repeal efforts. As current Chairman of the Ways & Means Committee, Representative Dave Camp and his staff has been helping us to promote HR 1259, and will be a great asset to the new deficit committee. Representative Jeb Hensarling, current Republican Conference Chairman, has been selected to sit as co-chair across from democratic Senator Patty Murray, both of which have voted for death tax repeal in the past. Senator John Kyl of Arizona, and current Senate Republican Whip, has voted for repeal in the past, and has been a major advocate for death tax rate reductions; he has recently come out with a statement against rate increases which can be found here. Other members who have also voted for repeal include Senator Max Baucus, current chairman of the Finance Committee, and Senator Rob Portman.

A majority of the members on the super committee have supported our position in the past, and we look forward to working with them again to ensure the death tax rates are not raised, and encourage them to promote repeal.

Tags: death tax, deficit reduction, murray, pledge, spending cuts, super committee, toomey, upton