CBO Report Misses the Mark on the Estate Tax

by Shawn Arnold - No Comments
Posted on August 20th, 2010 12:30 pm

The Congressional Budget Office (CBO) released a report yesterday about the effects of the Obama tax hikes. The report broke down earned revenues in terms of individual income taxes, corporate income taxes, social insurance taxes and “other revenues”.

The Federal Estate Tax, which is set to return in 2011 at a rate of 55 percent on assets over $1 million, was accounted for in the “other revenues” category. The report indicated that combined, “other revenues” will raise about $2.8 trillion over the next decade.

Bloggers immediately began spinning the data, suggesting that keeping full repeal of the Federal Estate Tax would double the deficit because another $2.6 trillion would be added to our current deficit without the Obama tax hikes.

But if you look at the fine print, what you see is that the CBO’s “other revenues” category also includes the Federal Reserve System and new excise taxes like the tanning tax, customs duties, and miscellaneous fees and fines. In fact, the largest revenue producer is the Federal Reserve System – not the estate tax -- which expects payment in full with interest for several trillion dollars of bailout packages: the auto bailout, the bank bailout, the new union bailout and a few other major bailout programs. Combined, these programs absolutely trump the impact of the Federal Estate Tax on revenue generation.

Considering the full economic effect of the death tax and its impact on the income, payroll and capital gains taxes, former U.S. Treasury Economist Steve Entin projects that repeal would increase net revenues by as much as $23.3 billion to $38 billion (or 1% of Federal Revenues each year over a ten year period).

Given the current public opinion on the debt and the deficit, it’s safe to suggest Congress make the obvious choice here: Kill the death tax!

Category: Deficit

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