With just a little more than 2 weeks left until election day, the candidates are angling on tax policy and lawmakers are beginning to lay the groundwork for the lame duck session. Here’s the latest from Washington and the campaign trail:
Romney and Repeal – On October 9, Republican presidential nominee Mitt Romney called for repeal of the estate tax, stating, “My own view is we ought to kill the death tax. You paid for that farm once. You shouldn’t have to pay for it again.”
Presidential Debate – Tax reform was front and center in the October 16 presidential debate. The estate tax issue came up only once, as President Obama criticized the price tag for Romney’s desired changes, which includes the cost of repeal. Observers particularly noted Romney’s insistence that he will not decrease taxes on high earners.
Romney stated, “Because I’m going to bring rates down across the board for everybody, but I’m going to limit deductions and exemptions and credits, particularly for people at the high end, because I am not going to have people at the high end pay less than they’re paying now. The top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects. So that’ll stay the same. Middle-income people are going to get a tax break.”
Romney went on to say, “And so in terms of bringing down deductions, one way of doing that would be to say everybody gets – I’ll pick a number – $25,000 of deductions and credits…. And I will not – I will not under any circumstances – reduce the share that’s being paid by the highest-income taxpayers, and I will not under any circumstances increase taxes on the middle class.”
The President countered, “So what I’ve said is your first $250,000 worth of income, no change. And that means 98 percent of American families, 97 percent of small businesses, they will not see a tax increase. I’m ready to sign that bill right now. The only reason it’s not happening is because Governor Romney’s allies in Congress have held the 98 percent hostage because they want tax breaks for the top 2 percent. But what I’ve also said is for above $250,000, we can go back to the tax rates we had when Bill Clinton was president, [when] we created 23 million new jobs. That’s part of what took us from deficits to surpluses.”
Biden Signaling Shift? – However, the previous week much speculation followed the October 11 vice presidential debate, in which Vice President Biden stated several times that the threshold for tax increases would be $1 million, an income level four times higher than the administration’s official position ($200,000 for individuals and $250,000 for married couples). The statements shine some interesting light on the ongoing debate within the Democratic Party, as more leaders have recently called for a higher $1 million threshold, including House Democratic Leader Nancy Pelosi (D-CA). Following the debate, the White House insisted its position remains the same.
Schumer and Marginal Rates – While many politicians on both sides of the aisle have called for comprehensive tax reform that lowers rates across the board while limiting deductions, credits and other preferences, Senator Chuck Schumer (D-NY) delivered a speech at the National Press Club on October 9 objecting to any reduction in the top marginal rates. As the third-ranking Democrat in the Senate and a member of the tax-writing Finance Committee, Schumer’s remarks could shift some thinking among Democrats on their approach to comprehensive reform.
Gang of 8 Negotiations – A bipartisan group of Senators known as the “Gang of 8” continued to meet on October 9 to seek a way to avert the year-end fiscal cliff in a way that maximizes the prospects for a long-term debt, spending, entitlement and tax reform deal. The Gang of 8 includes Senators Michael Bennet (D-CO), Saxby Chambliss (R-GA), Mike Crapo (R-ID), Dick Durbin (D-IL), Mike Johanns (R-NE), Kent Conrad (D-ND), Tom Coburn (R-OK) and Mark Warner (D-VA).
Conservation Argument for Repeal – In the September issue of the National Rifle Association’s American Hunter Magazine, an interesting article describes the negative impact of the estate tax on conservation efforts. In particular the article criticizes the IRS’s “theoretical use” approach to land valuation. The author argues, “It is in America’s best interest to create incentives for the preservation of undeveloped land.”
“Current Use” Valuation Reform Proposed – Representative Diane Black (R-TN), a member of the tax-writing Ways and Means Committee, has introduced legislation aimed at protecting family-owned farms, forests and ranches from the negative effects of the estate tax. The Keep the Forest and Farm in the Family Act (HR 6439) would allow farmers, ranchers and forest owners to value their land and timber at “current use” value instead of “best use” as long as they keep the land working for 10 years. The bill also seeks to remove a penalty for forest owners who harvest their timber within 10 years.
Congressman Opines on Repeal – Representative Steve King (R-IA) authored an op-ed appearing in the Washington Times on October 17 arguing for repeal of the estate tax. King called on legislators to work together to ensure that higher estate taxes are not reinstated in 2013 and said Congress should implement a retroactive solution next year if necessary.