EDITORIALS>>Inheritance for superrich
Pryor’s proposed bill, which would exempt all estates smaller than $5 million ($10 million for a couple) and reduce the overall tax rate, is a perfectly good solution to the small problems raised by the 90-year-old tax on large inheritances. The tax now applies to fewer than 2 percent of estates in Arkansas and under Pryor’s “compromise” it would apply to no more than three-tenths of 1 percent of estates, the very richest inheritances.
But Pryor’s is a pointless gesture. Similar proposals have been made by Democrats for more than a decade, but to the Bush administration and the Republican leadership eliminating the already negligible effect of the tax on modest estates of $2 million or so is beside the point. Repealing the estate tax is not about those people but about exempting from taxation the truly vast estates left by the superrich. That is what the 2001 tax law did, although they had to have the repeal expire in 2011 to make budget forecasts look tolerable, and that is all that Bush and the Congress will allow.
The bill, rather, is political cover for Pryor, who voted against the package, which is what Republicans wanted to happen. The tax favors for the wealthy were packaged with a minimum-wage increase to force Democrats like Pryor to vote against the minimum wage, a highly popular idea favored for years by Democrats, including Pryor. So we imagined that Pryor might want to take steps to assure voters that he really did want to lift the living standards of the very poorest workers, some 113,000 of them in Arkansas. (The state legislature early this year actually did the deed itself for Arkansas workers.)
Instead, Sen. Pryor was obliged to reassure the well- to-do who will pass on or inherit large assets that his vote did not mean that he was not sympathetic to them. Thus the compromise estate tax bill, which he contemplates introducing. Pryor has been hammered for his vote and his stance principally by the Arkansas Democrat Gazette, which favors eliminating the estate tax altogether and permanently. The newspaper’s owner, coincidentally, will one day leave a truly immense estate. The senator’s web site has said all along that he favored eliminating estate taxes on small businesses and farms, but by changing a clause in the sentence the paper’s editorials inferred that Pryor was promising to vote to repeal the tax altogether. When he voted against repeal, the paper called him hypocritical and dishonest. His was not the dishonest stance.
Here is all that anyone needs to know to understand Pryor’s predicament. In 2004, only 168 estates in Arkansas were paying federal estate tax of any kind. Most of those involved nominal amounts. In 2009, the last year that the tax is to apply before its one-year elimination, every estate smaller than $3.5 million ($7 million for couples) will be exempt. The tax will apply to roughly 3 of every 1,000 estates.
But those three involve some very powerful people. They are big spenders politically. The 113,000 minimum-wage workers? They will likely not give a dollar to a political campaign.