Another tax in flux as the fiscal cliff approaches.
Image by Andrew Harrer / Getty Images
WASHINGTON — A group of billionaires voiced support Tuesday for hiking the federal tax on inheritances, among those taxes currently being discussed as part of a "fiscal cliff" deal.
Policies on federal taxes and spending have so far played prominently in the negotiations to avert the austerity crisis that could result from a rash of tax hikes and spending cuts set to take effect at the beginning of next year.
But as lawmakers have publicly and repeatedly debated the merits of letting income tax rates go up for the wealthiest two percent of taxpayers, another looming tax change has gone largely unmentioned.
As part of the fiscal cliff, the federal tax on inheritances, or the estate tax, will revert back to its 2001 rate should Congress fail to reach an agreement by Jan. 1.
On Tuesday, a group of billionaires spoke out in support of an estate-tax rate in line with that being proposed by most Democrats, which would fall roughly between the old and new rates.
Robert Rubin, a former Treasury secretary and current co-chair of the Council on Foreign Relations, said a strong estate tax "can contribute substantially and constructively to our economic well-being" and could do so "without any adverse economic effect."
Republicans and some Democrats have opposed a higher estate tax as particularly harmful to farmers and small businesses, although supporters reject those claims.
On a conference call, Rubin noted that heirs often save much of an estate, whereas the government would spend 100 percent of estate tax money, thus driving the economy.
"Some days I just don't get it why this isn't clear to everybody, including people with wealth," said Richard Rockefeller of the benefits of a higher estate tax. He added, "As the grandson of John D. Rockefeller, I'm perfectly happy that the wealth he made goes with each succeeding generation toward the estate tax."
As part of the Bush tax cuts, the estate tax sunk to a rate of 35 percent on estates exceeding $5 million; on Jan. 1, it is set to climb to 55 percent on estates larger than $1 million.
Now, many Republicans hope to keep rates at their current level, while President Barack Obama supports a tax of roughly 45 percent on estates larger than $3.5 million.
On Tuesday, the group of billionaires roughly backed the president's proposal, calling for a 45 percent rate on inheritances exceeding $4 million.
"I and anyone who dies with an estate that qualifies can afford it," said Abigail Disney, the granddaughter of Roy Disney. She added, "The current state of affairs is absolutely counter to my deepest values as an American."
The group of billionaires also included John Bogle, the founder and former CEO of the Vanguard Group, and Bill Gates, Sr.