{"id":1579,"date":"2009-04-10T15:48:00","date_gmt":"2009-04-10T19:48:00","guid":{"rendered":"https:\/\/actec.matrixdev.net\/?post_type=capital-letter&p=1579"},"modified":"2024-01-22T15:38:08","modified_gmt":"2024-01-22T20:38:08","slug":"senate-debates-estate-tax-treasury-nominee-announced","status":"publish","type":"capital-letter","link":"https:\/\/actec.matrixdev.net\/capital-letter\/senate-debates-estate-tax-treasury-nominee-announced\/","title":{"rendered":"Senate Debates Estate Tax; Treasury Nominee Announced"},"content":{"rendered":"\n

The Senate employs nearly inscrutable budget techniques regarding the estate tax, and President Obama selects the new Assistant Secretary of the Treasury for Tax Policy.<\/strong><\/em>
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Dear Readers Who Follow Washington Developments:<\/p>\n\n\n\n

This Capital Letter reports on the progress of the estate tax provisions of the Administration\u2019s budget proposals in the Senate and the progress of the Administration itself in filling the top tax position in the Treasury Department.<\/p>\n\n\n\n

The Administration\u2019s Budget Proposals<\/strong><\/p>\n\n\n\n

This Capital Letter reports on the progress of the estate tax provisions of the Administration\u2019s budget proposals in the Senate and the progress of the Administration itself in filling the top tax position in the Treasury Department.The Administration\u2019s Budget Proposals<\/strong><\/p>\n\n\n\n

As mentioned in\u00a0Capital Letter No. 15<\/a>, the Obama Administration\u2019s budget proposals\u00a0 provide for the 2009 estate tax applicable exclusion amount of $3.5 million and estate tax rate of 45% to be made permanent.\u00a0\u00a0Capital Letter No. 13<\/a>\u00a0identified some reasons why that was expected, including residual impatience in Congress with the estate tax, the surprising identification of estate tax reform with middle class tax relief, and the fact that by some measurements the net increases in federal revenue from allowing the estate tax to revert to its pre-2002 levels would fall disproportionately on estates at the lower end of the array of taxable estates.

The ambitious document announcing the Administration\u2019s proposed budget, \u201cA New Era of Responsibility: Renewing America\u2019s Promise,\u201d was published February 26, 2009.\u00a0 The document has few tax details.\u00a0 But in a summary of the adjustments to baseline projections to reflect selective (targeted) continuation of the 2001 and 2003 tax cuts, a footnote (footnote 1 to Table S-5) states that \u201cthe estate tax is maintained at its 2009 parameters.\u201d\u00a0 Table S-4 sets forth the Administration\u2019s projections of estate and gift tax revenues under these budget proposals, as follows:<\/p>\n\n\n\n

Fiscal Year<\/td>Projected Revenue<\/td><\/tr>
2008<\/td>$29 billion<\/td><\/tr>
2009<\/td>$26 billion<\/td><\/tr>
2010<\/td>$20 billion<\/td><\/tr>
2011<\/td>$23 billion<\/td><\/tr>
2012<\/td>$25 billion<\/td><\/tr>
2013<\/td>$27 billion<\/td><\/tr>
2014<\/td>$27 billion<\/td><\/tr>
2015<\/td>$29 billion<\/td><\/tr>
2016<\/td>$31 billion<\/td><\/tr>
2017<\/td>$33 billion<\/td><\/tr>
2018<\/td>$36 billion<\/td><\/tr>
2019<\/td>$38 billion<\/td><\/tr>
Total 2010-2014<\/td>$121 billion<\/td><\/tr>
Total 2010-2019<\/td>$288 billion<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

The receipts for any fiscal year (which begins October 1) correspond generally to gifts made, and the estates of decedents dying, in the preceding calendar year.  The dip for fiscal 2009 presumably reflects depressed values in calendar 2008, and the larger dip for fiscal 2010 (although many would have expected it to be even larger) presumably reflects the increased exemption in effect in calendar 2009.  The plateau from fiscal 2013 to fiscal 2014 is a mystery.The Budget Debate in the Senate<\/strong><\/p>\n\n\n\n

Like the Administration proposals, the House and Senate versions of the budget resolution,\u00a0H. Con. Res. 85<\/a>\u00a0and\u00a0S. Con. Res. 13<\/a>, both as proposed by the respective Budget Committees and as passed by the House and Senate respectively, allow for 2009 estate tax law to be made permanent.

In the 1990s, under congressional Pay-As-You-Go (or \u201cPayGo\u201d) rules, it was common for proposed amendments to congressional budget resolutions to provide for \u201cdeficit-neutral reserve funds\u201d to acknowledge various aspirations within the constraints of the overall revenue and spending targets.\u00a0 Reviving that technique, several Senate amendments to\u00a0S. Con. Res. 13<\/a>\u00a0provided for such \u201cdeficit-neutral reserve funds.\u201d\u00a0 These amendments do not literally create \u201cfunds\u201d; they simply permit the appropriate committees to consider changes to the allocations in the budget resolution down the road, but only if the budget deficit would not be aggravated by those reallocations.\u00a0 As a practical matter, a \u201cdeficit-neutral reserve fund\u201d represents a commitment to consider certain actions agreed to be desirable if other mandated actions are scaled down or turn out to be less expensive than expected, if revenue estimates are adjusted upward, or if the appropriate committees discover that they can \u201cafford\u201d or \u201cpay for\u201d those actions in some other way.

In that tradition, on April 2, 2009, the Senate approved a \u201cdeficit-neutral reserve fund\u201d provided for in an\u00a0amendment<\/a>\u00a0offered by Senator Blanche Lincoln (D-AR) and cosponsored by Senators\u00a0Jon Kyl (R-AZ), Ben Nelson (D-NE),\u00a0Chuck Grassley (R-IA)<\/a>, Mark Pryor (D-AR),\u00a0Pat Roberts (R-KS), Mary Landrieu (D-LA),\u00a0Michael Enzi (R-WY),\u00a0Susan Collins (R-ME)<\/a>, and\u00a0John Thune (R-SD)<\/a>.\u00a0 The precise wording of Senator Lincoln\u2019s\u00a0amendment<\/a>\u00a0is:<\/p>\n\n\n\n

The Chairman of the Senate Committee on the Budget may revise the allocations of a committee or committees, aggregates, and other appropriate levels and limits in this resolution for one or more bills, joint resolutions, amendments, motions, or conference reports that would provide for estate tax reform legislation establishing\u2013<\/p>\n\n\n\n

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  1. an estate tax exemption level of $5,000,000, indexed for inflation,<\/li>\n\n\n\n
  2. a maximum estate tax rate of 35 percent,<\/li>\n\n\n\n
  3. a reunification of the estate and gift credits, and<\/li>\n\n\n\n
  4. portability of exemption between spouses, and<\/li>\n\n\n\n
  5. provided that such legislation would not increase the deficit over either the period of the total of fiscal years 2009 through 2014 or the period of the total of fiscal years 2009 through 2019.<\/li>\n<\/ol>\n\n\n\n

    This\u00a0amendment<\/a>\u00a0was supported in the Senate debate by\u00a0Minority Leader Mitch McConnell (R-KY)<\/a>\u00a0and\u00a0Ranking Finance Committee Member Chuck Grassley (R-IA)<\/a>\u00a0and opposed by Majority Leader Harry Reid (D-NV) and Budget Committee Chairman Kent Conrad (D-ND).

    Reprising themes of past Congresses,\u00a0    Minority Leader McConnell<\/a>\u00a0reminded his colleagues that \u201c[n]o one should have to be taxed on their assets twice, and no one should have to visit the tax man and the undertaker on the same day.\u00a0 It is the Government\u2019s final outrage.\u00a0 But if we can\u2019t repeal this tax, then we should at least lower it at a time when Americans are already burdened by shrinking retirement savings.\u201d

    In reply, the Majority Leader scolded that it was \u201cso stunning, so outrageous, that some would choose this hour of national crisis to push an amendment to slash the estate tax for the superwealthy….\u00a0 I can think of no way to describe this amendment other than stunning hypocrisy.\u201d

    In the end, the Senate approved Senator Lincoln\u2019s\u00a0    amendment<\/a>\u00a0by a vote of 51-48.\u00a0 Thus, the\u00a0amendment<\/a>\u00a0gave expression to the congressional impatience with the estate tax by permitting a majority of Senators to \u201cvote for\u201d a $5 million exemption and 35% top rate \u2013\u00a0if it won\u2019t increase the federal deficit<\/em>.\u00a0 In today\u2019s economic and fiscal environment, can anyone believe that such an amendment will have much effect?

    As if to leave no doubt about the purely aspirational nature of the\u00a0    Lincoln amendment<\/a>,\u00a0Assistant Majority Leader Richard Durbin (D-IL)<\/a>\u00a0immediately offered an\u00a0amendment<\/a>\u00a0providing that \u201c[i]n the Senate, it shall not be in order to consider any bill, joint resolution, amendment, motion, or conference report that would provide estate tax relief beyond $3,500,000 per person ($7,000,000 per married couple) and a graduated rate ending at less than 45 percent unless an equal amount of tax relief is provided to Americans earning less than $100,000 per year and that such relief is in addition to the amounts assumed in this budget resolution.\u201d\u00a0\u00a0Senator Kyl\u00a0spoke in mild opposition to the\u00a0Durbin amendment<\/a>, but Senator Lincoln herself, as well as her co-sponsors Senators Nelson and Pryor, voted for it. \u00a0The Senate approved the\u00a0Durbin amendment<\/a>\u00a0by a vote of 56-43.

    The\u00a0    Durbin amendment<\/a>\u00a0only makes it even harder to do what was already very hard to do.\u00a0 If the Lincoln and Durbin amendments are approved by the House and Senate in the final budget resolution, the\u00a0Ways and Means<\/a>\u00a0and\u00a0Finance Committees<\/a>\u00a0will be authorized to provide for all or part of the $5 million exemption and 35% top rate only if they can find, raise, or save enough money elsewhere to both pay for that relief over the next five and ten years and pay for the same level of additional tax relief for Americans earning less than $100,000 per year.\u00a0 Otherwise, such provisions would be subject to a point of order in the Senate that could be waived only by a vote of 60 Senators.\u00a0 In effect, the additional estate tax reductions contemplated by the\u00a0Lincoln amendment<\/a>\u00a0would have to be paid for twice.

    But Senators are talking about the estate tax.A Nominee for Assistant Secretary of the Treasury for Tax Policy<\/strong><\/p>\n\n\n\n

    Meanwhile, on March 28, 2009,\u00a0President Obama announced his intention to nominate Helen Elizabeth Garrett\u00a0as the new Assistant Secretary of Treasury (Tax Policy).\u00a0 (Anticipating a question readers might have, the corresponding nominations by Presidents Reagan, Clinton, and George W. Bush were made on February 12, February 19, and February 26 of their first years in office.)

    Beth Garrett is\u00a0Vice President for Academic Planning and Budget of the University of Southern California and Sydney M. Irmas Professor of Public Interest Law, Legal Ethics, Political Science, and Policy, Planning and Development at the Gould School of Law of the University of Southern California.\u00a0 She is a graduate of the University of Virginia School of Law and clerked for Justice Thurgood Marshall of the U.S. Supreme Court.\u00a0 She is experienced in dealing with bureaucracies, finances, and resource allocations, and she was a member of the Advisory Panel on Federal Tax Reform appointed by President Bush in 2005.\u00a0 Those who know her applaud her selection. Once Professor Garrett is confirmed by the Senate and sworn in as Assistant Secretary, we might anticipate the general freeze on administrative guidance imposed by the new Administration (like Administrations before it) on January 20 to begin to be relaxed with respect to tax guidance of interest to Fellows. Developments to watch for will then include some or all of the following:<\/p>\n\n\n\n