A news roundup, in other words…

Rep. Tom Cole (R-OK), Edmond Sun, “Obama’s policies stifle economic growth“: “EDMOND — In less than five weeks, tax hikes will go into effect for virtually all tax brackets unless Congress takes action. Despite public and bipartisan support for maintaining the current tax rates, President Obama and Democratic leaders in Congress have repeatedly refused to bring the issue to a vote. President Obama insists that his plan to raise taxes on the highest tax brackets will not affect job creators, but the facts indicate otherwise.” The Congressman cites the recent WSJ op-ed by John Engler and Jerry Howard, “Tax Hikes and the Small Business Job Machine.” Thank you.

Bloomberg, “Return of Estate Tax Looms as Final Impediment to Extending Bush Tax Cuts“: “In the past year trade groups such as the National Federation of Independent Business and the National Association of Manufacturers, alarmed by the possibility of a 55 percent rate in 2011, have pivoted toward urging lawmakers to adopt the approach favored by Kyl and Lincoln.” That’s an accurate assessment.

The Senate voted 61-35 on Tuesday for a motion by Sen. Mike Johanns (R-NE) to suspend the expansions of IRS 1099 reporting requirements imposed by the new health care law, but he needed 67 votes for the measure to proceed. Bloomberg reports the NAM’s opposition in its coverage, “Repeal of Health Law’s ‘Onerous’ Business-Expenses Rule Fails“: “The U.S. Chamber of Commerce and the National Association of Manufacturers, both based in Washington, and the Nashville- based National Federation of Independent Business supported repeal of the 1099 rule, saying the requirement would be cumbersome for business owners.” Cumbersome, yes. Stupidly, insanely burdensome and costly, as well.

A related motion by Sen. Max Baucus (D-MT) to get rid of the 1099 reporting requirement failed 44-53.

Investor’s Business Daily, “As EPA Goes Green, Businesses See Red From Lack Of Guidance“: “Big business is bracing for a series of Environmental Protection Agency regulations set to begin in January. The problem is, it doesn’t really know what those regulations are going to be. Neither does the EPA, which has essentially punted that responsibility down to the states.” Meanwhile, Administrator Jackson celebrates the 40th anniversary of the EPA. We suggest the slogan, “Regulatory Excess since the Nixon Era!”

As Singapore Goes, So Goes Spain. Isn’t that a strange concept? The Daily Record of Scotland reports, “Spanish manufacturers ordered to make chewing gum ‘less sticky’“: “Manufacturers have been ordered to change their formula so the gum is easier to clean from pavements. The problem was considered so serious that PM Jose Luis Rodriguez Zapatero held a cabinet meeting to tackle the issue.” We await the bureaucratic battle here in the United States to address the problems: FDA or EPA? What with the streets and nuisance and all, it might make Transportation Secretary LaHood’s priority list, too. Bicyclists hate getting gum on their gumwall tires.

You know those editorial cartoons that always appear the week after Christmas? The ones that depict the old, bearded man with an hourglass leaving the scene, replaced by the cheerful, diaper-clad baby wearing a sash that proclaims the upcoming year?

This year that baby could be replaced by the cowled, scythe-bearing depiction of death — unless Congress acts to prevent the return of the estate tax. If the lame-duck session of Congress fails to act, the estate tax will jump from its current 0 percent back to the top rate of 55 percent with just a $1 million exemption.

While the National Association of Manufacturers and many other business and farm groups have long advocated the permanent end of the estate tax, a reasonable, attainable compromise has been proposed by Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ). Their plan would exempt the first $5 million in an estate’s wealth from taxation and set the top rate at 35 percent.

From Dow-Jones, “Business Groups Back Quick Compromise On Estate Tax“:

Rather than try to use the lame-duck period to set long-term policy, Congress should find a quick compromise to stave off the punitive rates under current law, some business groups argue.

“The last thing we want to do is have any major tax policy determined in the course of a week in a lame-duck cycle following a significant electoral shift,” said Dena Battle, director of tax policy at the National Association of Manufacturers.

Battle said in the long haul, the group will continue to press for ” significant reform,” along the lines of the Lincoln-Kyl proposal.

John Engler, president and CEO of the National Associaton of Manufacturers, spoke to the NAM’s Board of Directors on Wednesday, assessing the political and economic consequences of the just-recessed 111th Congress. He observed:

You think about elections as sort of a performance review. Congress is going to have a pretty hard time arguing that they deserve to keep their jobs.

Think about this: They didn’t pass a budget. They failed to enact a single appropriations bill. Not one. We’ve got the return to the killer 2001 tax rates – that’s looming. The estate tax is poised to go back up to 55 percent, and we’ve got no R&D tax credit. Other than that …

Judging from his Washington Post column today, Charles Krauthammer must have been in the audience and been inspired by Engler. In “The Colbert Democrats,” Krauthammer notes Congress’ failure to enact budgets and appropriations bills and elaborates:

Congress adjourned without even a vote — nay, without even a Democratic bill — on the expiring Bush tax cuts. This is the ultimate in incompetence. After 20 months of control of the White House and Congress — during which they passed an elaborate, 1,000-page micromanagement of every detail of American health care — the Democrats adjourned without being able to tell the country what its tax rates will be on Jan. 1.

It’s not just income taxes. It’s capital gains and dividends, too. And the estate tax, which will careen insanely from 0 to 55 percent when the ball drops on Times Square on New Year’s Eve.

Nor is this harmless incompetence. To do this at a time when $2 trillion of capital is sitting on the sidelines because of rising uncertainty — and there is no greater uncertainty than next year’s tax rates — is staggeringly irresponsible.

No, Krauthammer really wasn’t in attendance — he’d be welcome at the NAM, to be sure — and really, Krauthammer and Engler are only stating the obvious. The really obvious. The outrageously obvious: Congress failed to act on taxes.

From The Hill, “Lawmakers face daunting tax agenda when they return for lame-duck session“:

 If Congress does nothing on taxes by the end of the year:

- The estate tax will return to pre-2001 levels, socking estates worth more than $1 million with a 55 percent tax.
- The capital gains tax on most assets will jump from 15 percent to 20 percent.
- Dividends currently taxed at 15 percent will skyrocket to individual tax rates that go as high as 39.6 percent.
- The Making Work Pay tax break will cease to exist.
- The Alternative Minimum Tax will hit the middle class for 2010 tax returns.
- A slew of tax breaks that expired last year, including credits for research and development expenses and relief for college tuition, will not be available for 2010 tax returns.
- The Child Tax Credit will revert from $1,000 to $500.

Hat tip: Veronique de Rugy

In today’s Wall Street Journal, Robert Rubin and Julian Robertson make the morbid argument that bringing back the estate tax makes perfect economic sense because it would have the “least negative impact on the economic activity.” After all, dead people won’t be spending that money.

The two further argue that reinstating a tax retroactively isn’t such a bad thing in this case because “presumably nobody’s demise was affected in timing by the structure of our tax law.” Umm…let’s hope not.

The argument they make is so simplistic, it’s frightening that it’s our former Treasury Secretary making it. The fact of the matter is that small manufacturers who want to pass their businesses onto their heirs pay exorbitant amounts to plan for the tax – and that’s wasted money that could be spent on jobs and capital expenditures. And that’s a negative impact on economic activity.

Cabinet officials were on the road last week, making announcements and promoting the Obama Administration’s priorities.

Des Moines Register blog, Aug. 17, “Vilsack: Estate tax won’t hurt most farmers“:

U.S. Agriculture Secretary Tom Vilsack today defended proposals to reinstate the estate tax, despite concerns raised at an Iowa State Fair roundtable about the need for more rural capital and incentives for young farmers.

Vilsack, the former Iowa governor, said he thinks the estate tax will be restored. The key is having appropriate exemptions for people who want to pass their farm down to a family member or someone else, he said. He expects to see a large enough exemption to cover the “vast majority” of farms and ranches in the country, he said.

St. Louis Post Dispatch, Aug. 20, “Salazar views Arch designs, says ‘We will get this done.’“:

Salazar called the five designs exciting and said that better use of the Arch grounds and connections to St. Louis and East St. Louis are important goals in even in a recession.

“We will make this one of our highest priorities,” he said. “I cannot find any place in the U.S. that has the frame for an urban park lilke you have here with the Arch and river.”

Tech Daily Dose, Aug. 17, “Broadband Grants Totaling $1.8 Billion Announced“:

(continue reading…)

Sen. Jon Kyl (R-AZ) spoke to the NAM’s Manufacturing Summit this morning, and drawing from his position as a member of Republican leadership and the Senate Finance Committee, focused his remarks on tax policy.

The Senator expressed surprise that Senate Democrats had not moved on the estate tax at all this year, even after the tax rate fell to 0 percent as of January 1 and returns to the old, top tax rate of 55 percent after Dec. 30th. Kyl and Sen. Blanche Lincoln (D-AZ) are sponsoring legislation that would create a top tax rate of 35 percent with a $5 million deduction and indexed to inflation.

He also talked about the prospect of the 2001 and 2003 “Bush tax cuts” expiring at the end of the year. Kyle urged manufacturers to talk to their members of Congress about the competitive environment Congress is failing to encourage. Ask these questions, he suggested:

How do you intend to enable American businesses to compete, if we have a very high corporate tax rate, if the capital gains and dividend rates go back up to where they were, and you in effect tax capital formation by allowing the top two brackets to be increased. How is that going to enable us to compete? When people say, we’re going to punish American because they’re taking jobs overseas, obviously they’re getting cause and effect relationship just exactly backwards. The question is, what’s driving us overseas?

The Senator also warned against the financial regulatory reform legislation, saying it will do as much harm to job creation as the health care legislation.

We’ve have sound files of his remarks, separated into his speech and Q&A.

• Kyl speech
• Question and answer

Bloomberg reports on business groups lobbying for a 35 percent death tax to prevent a return to the 55 percent tax rate at the end of the year. Business has long argued for eliminating the death tax altogether, but current political and budgetary realities make that an unrealistic goal at the moment.

A 35 percent rate “is really that sort of sweet spot of what’s acceptable to all sides,” said Dena Battle, director of tax policy for Washington-based National Association of Manufacturers. “We don’t want to see the tax go up to 55. We didn’t want to see the tax at 45.”

The longer Congress delays action, bringing a 55 percent tax closer to reality, the fewer reasons Democrats have to consider Kyl’s and Lincoln’s 35 percent alternative, said Jeff Shoaf, senior executive director for government affairs at Arlington, Virginia-based Associated General Contractors.

In a December 2009 column, Sen. Jon Kyl (R-AZ) explained the reasoning behind the language he and Sen. Blanche Lincoln (D-AR) have sponsored:

I have always believed that permanent repeal of the death tax represents the best policy, since it frees capital in the private market for more productive uses than fueling the federal government’s spending binge. However, even in the best of times, we have only been able to win 56 votes in the Senate for repeal, just shy of the needed 60. With the current makeup of Congress, permanent repeal is simply not in reach.

With that in mind, Democratic Senator Blanche Lincoln and I offered an amendment to the Senate budget resolution in 2009 that attempted to strike the best compromise. It would have permanently established a 35 percent death tax rate with a $5 million exemption amount indexed to inflation. That amendment passed by a vote of 51 to 48 with the support of 11 Democrats and every Republican senator. But, unfortunately, the congressional budget resolution is only an advisory measure.

How about a new estate tax paid only by union members?

That’s fair, isn’t it?

As of January 1, 2010, the federal estate tax falls to 0 percent. Unfortunately, as of Jan. 1, 2011, it returns to a top rate of 55 percent.

From The Blog of the Legal Times, “Estate Tax Battle Looms in 2010“:

“I think we all were really hopeful that everyone would come together and find that sweet spot that everyone could accept,” said Dena Battle, director of tax policy for the National Association of Manufacturers.

In the new year, lobbyists expect a rare effort to retroactively tweak the tax, which many are prepared to fight. . “I think there is going to be a significant effort to try and get this matter resolved early on,” Battle said. Chris Walters, manager for legislative affairs for the National Federation of Independent Business, said that “any tax increase that’s retroactive is unacceptable.”

USA Today reports taxpayers may be surprised to find that many estates are now taxed as capital gains. From “Estate tax set to expire Thursday“:

In the meantime, what might seem like a potential tax savings has become a guessing game for taxpayers, accountants, estate planners and tax lawyers. The impasse also could mean capital gains taxes on more inheritances.

“No one believed that Congress in its ultimate wisdom, with all the deficits looming, with a recession and two wars … would ever allow the estate tax to lapse. But that’s what’s happening,” said Martin Press, a tax attorney in Fort Lauderdale. “It’s created great uncertainty.”

Yes. Great, great uncertainty — and life-and-death consequences. From The Wall Street Journal, “Rich Cling to Life to Beat Tax Man“:

“I have two clients on life support, and the families are struggling with whether to continue heroic measures for a few more days,” says Joshua Rubenstein, a lawyer with Katten Muchin Rosenman LLP in New York. “Do they want to live for the rest of their lives having made serious medical decisions based on estate-tax law?”

UPDATE (6 p.m.): The expiration has definitely changed individual behavior, as witness USA TODAY’s founder, Al Neuharth, who writes a column, “For old, sick, rich is 2010 year to die?”:

In anticipation of the long-awaited death of the death tax, some at-risk people postponed some things until 2010. I know one person (me) who delayed until next week elective knee surgery (on both knees) that doctors recommended several years ago.

The odds are against my demise from that now rather-common surgery. But I decided to wait because I’ve carefully planned how to preserve in every way possible as much as possible of my little nest egg, not just for my wife but also for my eight children and two grandchildren.