Dow-Jones is reporting that the Congressional budget will maintain the estate tax at current levels, with an $3.5 million for individuals and $7 million for couples. Sen. Kent Conrad, D-ND, says the tax rate for estates higher than that level will be 45 percent.

Supporters of lowering the estate tax further said they will continue to press for a more generous exemption and a lower rate when Congress actually takes up estate-tax legislation later this year.

“You would be hard pressed to find a manufacturer who falls below the $3.5 million exemption,” said Dena Battle, director of tax policy at the National Association of Manufacturers. “We remain hopeful that Congress will do something better than the current policy.”

More of the same, really: Love the jobs, burden the jobs-creators.

Michael Kinsley, “Democrats for Rich Heirs?“:

Oh, small business blah blah blah. For the umpteenth time: Big businesses (such as General Motors) are mostly owned by people of small means (workers through their pension funds, 401(k)s and so on). To be affected by the estate tax, a business must be owned by someone of large means: at least $7 million. Small businesses come and go. Yes, they create jobs disproportionately. They also eliminate jobs disproportionately. There’s nothing wrong with small businesses, but there is no reason of fairness or efficiency that they deserve special treatment.

Oh, Michael Kinsley blah blah blah.

That not being an adequate retort, we’ll instead cite Sen. Blanche Lincoln (D-AR), sponsor of the Senate amendment to reduce the death tax. From her floor statement, April 2:

Because my time is limited, I wish to take a moment to read to you a few excerpts from an editorial that appeared in the Arkansas Democrat-Gazette earlier this year. It was submitted by a member of a family who runs a timber operation in southwest Arkansas and that has been in the family since 1907. He said:

The estate tax kills jobs. It kills companies that provide jobs. In the process it kills towns and communities, particularly those in rural areas dependent upon the land and local industry.

Five times this man’s family has been subjected to the estate tax—five times. He goes on:

Between the 1950s and 1980s, vast amounts of money—tens of millions of dollars—were raised to pay the tax. Lands were clear cut, mills liquidated, communities destroyed. . . The next hit will be too great.

Think about this type of family business. They have grown their business, reinvested in it over a century’s worth of time, put almost all their profits back into it, and now this particular company employs over 1,000 Arkansans and has multiple mills that are worth a good bit of money—millions of dollars.

Blahing aside, doesn’t the man make a compelling argument economically, that the death tax destroys wealth and investment and jobs?

Today’s editorial in the Wall Street Journal, “Death Blow,” on the death tax points us to two representative expressions on the issue last week’s Senate budget debate.

The Senate voted 51-48 (roll call) for an amendment sponsored by Sen. Blanche Lincoln (D-AR) and Sen. Jon Kyl (R-AZ) to cut the death tax rate permanently to 35 percent and exempt all estates of less than $10 million per couple ($5 million for a single taxpayer) from any tax. President Obama is seeking a 45 percent rate with just a $7 million exemption.

Senate Majority Leader Harry Reid (D-NV) inveighed against the amendment (his remarks are here). Excerpt:

President Obama inherited a crisis that no President should have to inherit or fix. Instead of focusing full time on the future, he and we in Congress must first clean up the devastating mistakes of the past. We can only turn the page from the recession to recovery if we watch every single taxpayer dollar the way families watch every dollar in their budget. Every dollar counts.

That is why it is so stunning, so outrageous, that some would choose this hour of national crisis to push an amendment to slash the estate tax for the superwealthy. This isn’t for the wealthy; this is for the superwealthy. Yet that is what we see here today.

Superwealthy? Others see jobs creators. Sen. Lincoln had moments earlier recounted a letter in a newspaper from a member of a family who runs a timber operation in southwest Arkansas, a family business since 1907 — and his family had been hit five times by the estate tax. From Sen. Lincoln’s remarks:

Think about this type of family business. They have grown their business, reinvested in it over a century’s worth of time, put almost all their profits back into it, and now this particular company employs over 1,000 Arkansans and has multiple mills that are worth a good bit of money—millions of dollars.

This amendment provides real relief to our family-owned businesses. In a time when our Government has handed out billions upon billions to failed Wall Street banks, it is time we provide a little relief to our businesses on Main Street that are in need of help right now. These are people who employ more than half the workers in Arkansas. These are the people who, if we reform the estate tax, will invest in their businesses and create more jobs.

Our emphasis. And the economic reality speaks far louder than invidious labels.

From The New York Times’ editorial today, “Guarding the Family Fortune,” another pure distillation of class warfare:

Last week, as the unemployment rate hit a 25-year high and nearly one in 10 Americans was receiving food stamps, 10 Democrats in the Senate joined all 41 Republican senators to cut estate taxes for the wealthiest families. The provision would funnel an additional $91 billion over 10 years to the heirs of megafortunes, money that would otherwise have been paid in federal taxes or donated to charity.

Philip Klein of The American Spectator takes strenuous issue:

While killing the death tax wouldn’t be at the top of my list of polices to pursue at this point in time, it’s sickening that the Times would use the term “funnel” — a word normally associated with shady dealings and extortion rackets — in this context. The money we’re talking about here is money that individuals earn honestly, pay taxes on while they’re still alive, and hand down to their surviving family. The way the Times portrays it, government starts off with a natural right to all money earned in the United States. Any legislation that pushes taxes south of the prevailing rate at the time is a “cost” to government because they’re being deprived of revenue that is rightfully theirs, and now, if wealthy Americans are involved, it’s described like a money-laundering operation.

How’s the Times doing these days, anyway?

Gee, after we say something passingly nice about the left-wing advocacy group OMB Watch, they attack two Senators for daring to challenge the death tax:

Long Overdue Outrage Over the Anti-Estate Tax Crowd

Both the New York Times and the Washington Post ran lead editorials this morning denouncing the attempt of Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) to give yet another tax cut to the children of the very richest Americans. Both editorials are spot on and raise excellent points about why Sens. Lincoln and Kyl seem to be both out of touch and out of their minds. In fact, both editorials express far more outrage and disdain for this proposed tax cut than I’ve ever seen before in any newspaper. (Read the Times and Post editorials.)

(Adam Hughes 04/02/09)

“Out of their minds.” OK, here’s the testmony of Eugene Sukup, chairman of the board of Sukump Manufacturing Company in Sheffield, Iowa, speaking at a November 2007 hearing of the Senate Finance Committee.

I’m not bragging when I tell you that businesses like Sukup Manufacturing are the backbone of our economy. By the same token, when a business like ours is sold off or shuttered, the loss to the economy is great. If Sukup closed today, 350 people would lose their jobs. But, that’s just the beginning. Without jobs, there’s no reason for a child care center. As people move on to other places, the restaurants and stores close down, the dentist moves to a bigger city with more customers. The loss would be felt in Iowa, in Arkansas, in South Dakota.

Now, to be clear, we’re a growing company. So, why would we close down or sell off? I’m here today to tell you that one of the greatest threats to our family-owned business is the estate tax. If my wife Mary and I died today, we estimate that our estate tax liability would be somewhere between $15 and $20 million dollars. The only way for my sons to pay that tax would be to sell off the business.

Folks will tell you that you can “avoid” the tax. Well, maybe that’s true in some cases, but it also involves extremely high financial planning costs including expensive life insurance policies that businesses pay year in and year out. Money that we put into life insurance policies and other financial planning tools to avoid the tax is money that we could have been putting into the business - hiring more employees and expanding into other states.  

Any insults about mental health you want to throw his way? Mr. Sukup is, after all, a member of the “anti-estate tax crowd.”

We bet most of his employees are, too.

Wall Street Journal, “Night of the Living Death Tax“:

Lawrence Summers, President Obama’s chief economic adviser, declared recently that “Let’s be very clear: There are no, no tax increases this year. There are no, no tax increases next year.” Oh yes, yes, there are. The President’s budget calls for the largest increase in the death tax in U.S. history in 2010.

The announcement of this tax increase is buried in footnote 1 on page 127 of the President’s budget. That note reads: “The estate tax is maintained at its 2009 parameters.” This means the death tax won’t fall to zero next year as scheduled under current law, but estates will be taxed instead at up to 45%, with an exemption level of $3.5 million (or $7 million for a couple). Better not plan on dying next year after all.

Saving the death tax will have one unavoidable impact: Jobs destroyed or not created.

From the Washington Post, “Obama’s First Budget Seeks To Trim Deficit“:

Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.

Current rate of 45 percent? Yes, but it’s also important to point out that under tax legislation enacted in 2001, the death tax is phased out and ultimately repealed in 2010. That is, a rate of 0 percent. Absent new legislation, the tax will revert to rates as high as the confiscatory level of 55 percent in 2011.

Also, instead of encouraging investment through capital gains reduction, it appears President Obama’s plan would raise the tax, discouraging investment.

From the Wall Street Journal, “Estates of Pain,” with the subhed, “The first tax increase of the Obama era.”

Mark it down as the first tax increase of the new Democratic era. The Journal reported yesterday that President-elect Obama and Congressional leaders intend to maintain the estate tax rather than let it expire on schedule in 2010.

They will do so even though their economic stimulus plan is supposed to be about creating millions of new jobs in a hurry. The death tax strikes most heavily at small- and medium-sized family-owned businesses that generate the majority of new American jobs. So hitting these family businesses with a multimillion dollar tax bill when the owner dies won’t help job creation.

Yesterday’s Page 1 story in the Journal was, “Obama Plans to Keep Estate Tax.” And from the WSJ’s Independent Street blog, “Entrepreneurs Fight Death Tax’s Resurrection.”

The NAM’s resources on the death tax and hostility toward investment and economic growth is located here.

Down here in the Tidewater area of Virginia for the Thanksgiving weekend, happened to catch the Neal Boortz radio program. Boortz, of Atlanta, is a libertarian known for his advocacy of the flat tax.

Boortz’s guest host today is Herman Cain, who warrants attention for his highly successful manufacturing career at Pillsbury and later his running of Godfather’s Pizza.

Cain’s topic for the day: The death tax! He’s informing his audience, repeatedly, in passionate terms, that the estate tax drops to 0 percent in 2010 and then returns to its earlier 55 percent rate in 2011.

From 0 to 55 percent: Not to be macabre or anything, but that’s certainly a motivation to get your dying over before January 1, 2011.

Cain provided testimony to the Senate Finance Committee in 2007 on the death tax, relating the story of his father’s climb through hard work to prosperity:

By the time of my mother’s death in 2005, my father’s assets had grown modestly leaving his family with a death tax liability of $1.3 million. My father would have been proud to have known that his hard earnings had been well-managed and used to propel his family to ever greater heights. Somehow, I do not think he would be nearly as pleased to learn that nearly half of it never made it into the hands of his grandchildren.

Yet my father is only one example of thousands. Most Americans who have earned over a million dollars in their life time have done it through hard work and rigorous discipline. It is easy for members of congress to talk about wealth disparity and to gloat about their grand schemes to ensure “fairness.” It is another matter when they confront the individuals whose “wealth disparity” they are actually seizing. Somehow, I get the impression that my father’s story – and the thousands like it – does not fit their expected redistributionist model.

Although the death tax’s fundamental unfairness and its effect discouraging investment are major issues for many small-business owners, including hundreds of smaller manufacturers who belong to the NAM, the issue never really made a mark in the 2008 presidential campaigns.

But unless Congress acts soon to change the law, the death tax could be a defining issue in the 2010 congressional elections. As it should be.

So, yes, surprised that Cain was talking about the issue, but gratified, too. In a time of economic difficulty, there’s a looming increase in an important tax rate, the death tax — from 0 to 55 percent. It SHOULD be talked about.