Some Wealthy Americans Favor Strong Estate Tax, Endorse McDermott Bill
By Diane Freda (Bureau of National Affairs Author)
Bill Gates Sr. is one of approximately 2,000 wealthy Americans who have signed on in favor of having a strong estate tax, Mike Lapham, director of United for a Fair Economy’s Responsible Wealth Project, said April 11.
Speaking at a Democratic Action Education Fund progressive liberal briefing on how to get the wealthiest 1 percent of the population to pay more in taxes, Lapham said some of them are supporting H.R. 3467, a bill by Rep. Jim McDermott (D-Wash.) that would return the estate tax to a 55% maximum marginal tax rate and create a $1 million exemption for individuals and $2 million exemption for married couples. Both would be indexed for inflation.
Lapham said some of the wealthy people he is working with on the East and West coasts think the $1 million exemption level is too low, since property values are higher there and that exemption level is quickly reached.
“Certainly we don’t need it to be $5 million, we don’t even need it to be $3.5 million per person or $7 million per couple,” he said. He favors a tax rate lower than 45% that gradually rises so that more people are pulled into paying the tax, and thinks the rate also should be indexed for inflation.
Seven panelists came at the issue of how to accomplish tax reform from different angles. All of them said the opportunity for change should be seized now-while populist feeling is running high over what is perceived as mounting tax inequality.
Wall Street Speculation Tax
As have other presidents, President Obama has framed a progressive income tax as a fairness issue rather than as a way to pay for war or other specific governmental needs, Rebecca Thiess, analyst with the Economic Policy Institute, told the gathering.
Dean Baker, co-director of the Center for Economic Policy Research, said he is in favor of a financial speculations tax-taxing Wall Street speculation-which would have the added benefit of discouraging short-term speculation in the financial markets. Taxing stock trades alone could yield $150 billion a year, he said.
The most elemental fix for many would be allowing the high-income Bush-era tax cuts to expire. Tax cuts for the top 2% of wage earners should be taken back, said Baker and Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities. That would raise the top tax rate to 39.6%. The economy did well in the 1990s when the job creators paid that tax rate, Baker said. He also said a tax rate of 45% or 50% should not be a problem.
In addition, there is a big gap between capital gains and dividend income, and ordinary income, which is why the so-called Buffett rule has come into being, Baker said. The rule, named after billionaire investor Warren Buffett, would set a minimum 30% tax rate on households earning more than $1 million per year. The Buffetts of the world get most or all of their income from capital gains and dividends and are paying 15%, while average working Americans pay 25%, according to Baker.
Meanwhile, Robert McIntyre, director of Citizens for Tax Justice, said that while Obama wants to get rid of tax loopholes, he then wants to use the money to lower the corporate tax rate. McIntyre said Obama believes corporations are paying “exactly the perfect amount in taxes right now,” which is 1.2% of gross domestic product. “I think we can talk him out of that,” McIntyre added.
McIntyre said some corporations are paying the full 35% while others are paying nothing. For the most part, who pays depends on who has lobbying power in Congress, he said.
The debate over whether the United States should tax foreign profits should be elevated so that average Americans can weigh in, Marr said. Many of the congressional plans say there should be a zero percent tax rate on foreign profits. But the average person might not think it is good to encourage investments overseas ahead of in the United States, he said.