The Free Enterprise Fund continues a campaign of misinformation against
the estate tax.
June 26, 2006
Modified:June 26, 2006
Summary
The conservative Free Enterprise Fund (FEF) continues to push for
permanent repeal of the federal estate tax with one of the most
blatantly false advertising campaigns we've seen this year.
One recent TV ad repeats an utterly untrue claim that the estate tax can
"rip away 55 per cent of what you save for loved ones." In fact, the tax
takes zero per cent from all but a very few. Even multimillionaires pay
an average effective tax rate estimated currently at less than 22 per
cent of their estates.
The ads are particularly nasty in their tone as well. One portrays
Democratic Sen. Maria Cantwell of Washington as a carrion bird, saying
"she voted with the vultures" to oppose consideration of estate-tax
repeal. Another attacks Democratic Sen. David Pryor of Arkansas for
supposedly going back on a promise to support repeal, saying "Pryor is a
liar." Actually, Pryor is on record opposing total repeal, though a
statement on his website can easily be read to imply the opposite.
Analysis
For months the Free Enterprise Fund has been running what it says is a
$4.1 million campaign to kill the federal estate tax for good. So far
this year the FEF says it has run ads nationally on Fox News and in
seven states: Arkansas, Louisiana, Montana, Rhode Island, North Dakota,
South Dakota and Washington. We've noted some of their distortions
before . They're still putting out false information.
Free Enterprise Fund Ad "Vultures"
(On Screen: Vultures circling overhead, then feeding on a carcass.)
Announcer: When the vultures circle, it means they’ve come to take their
share of your savings.
The death tax can rip away 55% of what you save for loved ones.
It’s a vulture of a tax, on your home, your business, the family farm,
everything.
When the Senate voted on ending the death tax, the vultures wanted to
keep feeding on your savings. Maria Cantwell voted to keep the death
tax. She voted with the vultures.
(On Screen: Maria Cantwell’s head superimposed on the body of a vulture)
Announcer:Tell her, it’s time to end taxation without respiration.
Vultures?
In ad after ad, FEF has repeated a false claim that the estate tax can
take 55 per cent of "what you save." The latest version shows vultures
feeding on carrion, and superimposes the head of Sen. Cantwell on a
bird's body and says she "voted with the vultures" to prevent Senate
consideration of a repeal measure.
The problem with this and several earlier FEF ads is that there is no
way that even a billionaire would lose 55 per cent of their estate to
the federal tax. The current top marginal rate is 46 per cent, for one
thing. That rate doesn't apply to the entire estate, only to amounts
above a specified level. A s we have pointed out before , for anyone
who dies in 2006 the tax applies only to amounts over $2 million (or $4
million for couples who take advantage of estate-planning legal maneuvers.)
So – just to be clear – that means that for the vast majority of
Americans the estate tax will take zero per cent. Just over one per cent
of Americans who died in 2002 owed any estate tax at all, according to
the most recent figures from the Internal Revenue Service. That was when
only the first $1 million was exempt. Now that the exemption has
doubled, experts at the nonpartisan Tax Policy Center calculate that
only 12,600 Americans who die in 2006 will owe any estate tax at all.
That's roughly one in every 200. Furthermore, even for those affluent
few, the Tax Policy Center estimates that the estate tax will take an
average of 18.7 per cent. Even for estates valued at over $20 million,
the average tax will be 21.7 per cent.
We asked the Free Enterprise Fund to show us how it would be possible
for the estate tax to take 55 per cent of anybody's estate, and they did
not do so. Instead, FEF policy analyst Marco DeSena pointed to "the 55
per cent estate tax rate that will be imposed when the current law runs
out in 2010." That doesn't come close to backing up the ad's claim, however.
It is true that the estate tax currently is scheduled to be repealed for
one year only, 2010, and then return at a top marginal rate of 55 per
cent in 2011. But that rate would not apply to the entire estate. The
first $1 million would be completely exempt ($2 million for a couple),
and the rate on amounts over that would go up in stages before reaching
the maximum. Even a billionaire who engaged in no estate planning
couldn't possibly lose 55 per cent of everything.
It's unlikely the 55 per cent rate will ever come back. The House
approved a permanent reduction in the estate tax on June 22 by a
bipartisan vote of 269 to 156. It would exempt all estates under $5
million from any tax, and sharply reduce rates, to 15 per cent for most
taxable estates. A majority of Senate members are also on record
favoring either a reduction or repeal of the estate tax, and a motion to
cut off a Democratic filibuster and take up a repeal bill fell only
three votes short of the required 60 votes on June 8. FEF says even the
House measure is not enough. They are holding out for no tax at all,
even for billionaires.
Free Enterprise Fund Ad:
"Pryor the Liar"
Announcer: Mark Pryor is unbelievable. First Pryor says, 'I support the
permanent repeal of an estate tax that harms small businesses and family
farms.' Then he votes against repealing it. Tell Mark Pryor he's a liar.
(On screen: 'Pryor is a liar')
Who's A Liar?
Another recent FEF ad running in Arkansas attacks Sen. Mark Pryor for
voting to block consideration of a repeal bill on June 8. The announcer
says, "Tell Mark Pryor he's a liar."
What the 15-second ad claims to be a lie is a statement on Pryor's
Senate website saying (as of June 24): "I support the permanent repeal
of an estate tax that harms small businesses and family farms." It is
true that Pryor's statement is worded in a misleading way, and could
easily give the impression that he supports total repeal of the entire
estate tax. However, he's stated clearly on other occasions that he
supports "repeal" for farmers and small-business owners only, and
opposes repeal of the entire tax. Even the statement on his website
refers to repealing "an" estate tax, and not "the" estate tax.
Pryor has made no secret of his opposition to blanket repeal. On Nov. 7,
2005, the Arkansas Business newspaper reported: "Even Democratic U.S.
Sens. Blanche Lincoln and Mark Pryor are divided. Pryor opposes the
repeal , while Lincoln is for it. Another home-state newspaper, the
Arkansas Democrat-Gazette, said in an editorial on June 14 that "we'd
been under the impression he'd been for only partial repeal all along."
Foes of the estate tax were well aware that Pryor was not supporting
total repeal. Americans for Tax Reform, noting the Arkansas Business
story, issued a statement just before the June 8 Senate vote saying
Pryor favored "reform" and noting that the state's other senator "has
gone one step further and claims she is for outright repeal."
What Pryor means by "repeal" for farmers and small-business owners is
not entirely clear. He told Arkansas Business in a prepared statement
that while he generally opposes repeal, "I do, however, fully support
raising the estate tax exemption high enough to protect our [farm]
producers and small businesses from being harmed." He did not specify
what exemption level he favored, though presumably it would be higher
than the $3.5 million ($7 million for a couple) that is scheduled to
take effect in 2009. Whether a higher exemption amounts to "repeal" for
farmers and proprietors is a matter of interpretation. And whether the
misleading statement on Pryor's website is simply a result of clumsy
wording, or of a sly intent to deceive, we leave to the judgment of our
readers.
-by Brooks Jackson
Sources
Tax Policy Center, Table T06-0020, "Current Law: Distribution of Gross
Estate and Net Estate Tax By Size of Gross Estate" 23 Jan 2006.
"Web site wobbling; Mark Pryor's Clinton clause," Arkansas
Democrat-Gazette (Little Rock), editorial 14 June 2006
Mark Friedman, "Future of Federal Estate Tax Up in Heir," Arkansas
Business, 7 Nov 2005: A1.
Table 17 .--"Taxable Estate Tax Returns as a Percentage of Adult Deaths,
Selected Years of Death, 1934-2002," Internal Revenue, Statistics of
Income Winter 2005-2006 Bulletin, Publication 1136
Bloomberg News, " House Approves Legislation That Limits Reach of U.S.
Estate Tax
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