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President Clinton: Maintaining our Fiscal Discipline by Vetoing One in a Series Of GOP Tax Breaks that would bring America Back into Deficits
President Clinton: Maintaining our Fiscal Discipline by Vetoing One in a Series of GOP Tax Breaks that would bring America Back into Deficits
President Clinton today will veto the bill to repeal the estate tax, one in a series of costly tax cuts passed by the majority in Congress that, combined with the tax cuts supported by the Congressional majority for next year, would cost $2 trillion, undermine our fiscal discipline, and plunge America back into on-budget deficits. This approach would leave no money for a Medicare prescription drug benefit, strengthening Social Security and Medicare, paying down the debt by 2012, or investing in key priorities like reducing class size and repairing crumbling schools. President Clinton will urge Congress to pass his targeted tax cuts which provide substantially more tax relief for middle class families at less than half the total cost of the Congressional proposals. He will also emphasize his willingness to work with Congress to pass fiscally responsible, fairer, simpler, and more efficient estate tax relief targeted toward small businesses and family farms. Democrats in Congress have offered better estate tax alternatives that provide immediate, more-targeted, fiscally responsible tax relief.
THIS IS ANOTHER IN A $2 TRILLION SERIES OF GOP TAX BREAKS THAT, TAKEN TOGETHER, WOULD DRIVE AMERICA BACK INTO DEFICITS
According to Congress’ own calculations, the tax cuts House Republicans have passed this year would cost $734.2 billion over ten years, which with interest would drain over $900 billion of the budget surplus. (This assumes that the so-called marriage penalty legislation continues in effect after 2004, which the Joint Committee on Taxation estimates would cost $292.5 billion over 10 years, rather than expiring as the Republican Congress assumes.)
The tax cuts proposed by the Republican nominee and endorsed by many prominent Congressional Republicans, would cost $1.3 trillion over 9 years, draining $1.6 trillion of the surplus (including interest).
After eliminating duplicate provisions, the tax cuts passed this year and endorsed for next year by the Republican Party would drain over $2 trillion, more than the entire $1.8 trillion projected budget surplus.
THE REPUBLICAN ESTATE TAX REPEAL WOULD UNDERMINE OUR FISCAL DISCIPLINE, AND BENEFIT ONLY THE MOST WELL-OFF. The majority in Congress has taken the wrong approach. Repealing the estate tax would be fiscally irresponsible, regressive, poorly targeted to small businesses and family farms, and would undermine charitable giving.
The cost of the backloaded bill passed by the House and Senate would be $100 billion from 2001-10, but about $750 billion from 2011-20, just when the baby boom generation begins to retire.
In 2010, estate tax repeal would benefit only 54,000 estates – about 2 percent of decedents – providing an average tax cut of $800,000.
More than half of the benefit of repeal would go to the top one-tenth of one percent of families. That is an average tax cut of $7 million each for the 3,000 wealthiest families in 2010.
Small businesses and family farms would get only a tiny fraction of the benefit of repeal:
Only a tiny fraction of the benefit of repeal goes to small businesses and family farms; in 1998 only 1,800 estates were composed primarily of small businesses and family farms.
Studies indicate that, without the estate tax, charitable donations and bequests would fall by $5 billion to $6 billion per year.
THE DEMOCRATS IN THE HOUSE AND THE SENATE HAVE PROPOSED A MORE TARGETED, RESPONSIBLE APPROACH. The House and Senate Democrats both had estate tax proposals that were more fiscally responsible and targeted towards those who need relief most.
The House Democratic proposal ($22 billion) would take the majority of the very few taxable small businesses and family farms off the estate tax and provide a 20 percent reduction in estate tax rates.
The Senate Democratic proposal ($60 billion) would eliminate estate taxes for two-thirds of the people currently paying it and for virtually all small businesses and family farms. Fully phased in, it is only one-fifth the cost of repeal.
Both the House and Senate Democrats would have provided most of their estate tax relief immediately. That means that most small businesses and family farms would have their estate taxes eliminated immediately under the Democratic alternatives, while they would have to wait until 2010 for estate tax repeal under the Republican plan.
In 1997, President Clinton worked with Congress on a bipartisan basis that exempted many farms and small businesses from tax. The President proposed and Congress also passed an important provision allowing small businesses and family farms to pay their estate taxes over 14 years at below-market interest rates.
CONGRESS HAS FAILED TO ACT ON AMERICA’S PRIORITIES: At the same time, the Republican Congress has failed to act on crucial priorities for the American people:
They have not moved forward on a minimum wage increase that would benefit more than ten million workers.
They have not moved forward on an affordable Medicare prescription drug benefit that, when fully phased in, would cost substantially less than repealing the estate tax but benefit more than 40 million Americans.
And they have not acted on tax cuts that address priorities like making college more affordable, helping families pay for child care and long-term care, encouraging retirement savings, or expanding the Earned Income Tax Credit to reduce poverty among families with three or more children.