As the Senate prepares to take up the federal estate tax, two groups launch ads battling over permanent repeal.
The pro-tax Coalition for America's Priorities (CAP) released a TV ad featuring a Paris Hilton look-alike. It says repealing the estate tax will be a "trillion-dollar giveaway" for "billionaires and heiresses." A companion radio ad has a Hilton imitator saying repeal would be "really cool." It's true that repeal would benefit mainly the very wealthy and cost tens of billions each year, but the trillion-dollar figure is a big exaggeration.
The anti-tax American Family Business Institute (AFBI) released an Internet ad calling on John McCain to "keep his promise" and vote to "end the death tax." It's true that McCain has said he won't support a filibuster to kill repeal efforts, but in the past he's favored retaining the estate tax in a much-reduced form.
A TV ad by the same group says that "some families . . . lose everything they have" from the tax, which is false. The top rate is currently 46 per cent, and the first $2 million isn't taxed at all.
The ad also says it is "the tax farmers and ranchers fear most," which misrepresents polling data showing 31 per cent of all respondents (not just farmers or ranchers) rated the estate tax as the "least fair" federal levy, not the most fearsome.
The Paris Hilton ads are part of a $750,000 multi-media ad buy aimed at "real reform" rather than repeal of the estate tax. They began running May 29.
CAP Ad: "Give and Take"
Announcer: In Washington it's called "give and take;" politicians give the wealthiest Americans a trillion dollar tax break, and take from Social Security and Medicare benefits.
(On Screen: Split screen with Paris Hilton look-alike on left getting her photo taken, on the right images of the elderly and doctors)
Senators give billionaires and heiresses a repeal of the estate tax, and take $75 billion a year from our children's future. Unless you take action and stop this trillion-dollar giveaway. Contact your Senators today. Tell them to support real reform, not repeal, of the estate tax. Make it fair for all Americans.
(On Screen: Paid for by the Coalition for America's Priorities)
The thirty-second TV spot, "Give and Take," shows an actress that looks very similar to Miss Hilton (little dog and all) as an announcer says that repealing the estate tax takes "$75 billion a year from our children's future" and amounts to a "trillion-dollar giveaway." Both numbers are several times too large. The estate tax took in only $21 billion in 2004, for one thing. The trillion-dollar figure is not only a ten-year estimate, but is based on the unlikely assumption that the alternative to repeal is reviving the tax at the level that prevailed in 2001. That has little to no chance of happening, and even the ad's sponsors are not pushing it. They say, "We support reasonable, sustainable and permanent estate tax reform." That means reducing the number of estates that must pay the tax and, possibly, further reductions in rates below current levels.
As Congress set things up in the 2001 tax-cut bill, the estate tax has been greatly reduced and is scheduled to disappear completely in 2010, but only for one year. If Congress takes no further action the estate tax will return in 2011 at its original level. Republican Sen. John Kyl of Arizona, a leading advocate of repeal, has recently said that he doesn't think the full Senate will support permanent repeal. Instead, he has proposed cutting the maximum rate to 15 per cent and raising the threshold to $5 million.
"Mega Tax Break"
The 60-second radio spot, "Awesome" features a Paris Hilton impersonator saying the Senate wants to change the estate tax so "mega-millionaires, and heiresses, get another mega tax break."
CAP Radio Ad: "Awesome"
Woman's Voice: Hi, it's Paris. Here to say how awesome I think the United States Senate is. So what gas is over $3 a gallon? Like...use a credit card! And Social Security and Medicare are going broke? Aren't those for like old and sick people? And our country is $9 trillion in debt? Whatever.
All these "so-called" problems and what's the Senate doing about them? Nothing. Like me most days.
Instead they want to do something really cool. Change the estate tax so mega-millionaires, and heiresses, get another mega tax break. We get to play more. You get to pay more. That's so awesome.
So don't call your senators. Because if you do, they might like do something really stupid like decide to not give my friends and me a trillion-dollar tax break. And that would be like...not awesome.
Announcer: Contact your Senators today. Tell them it's time to stop this "mega-tax break for mega-millionaires." This message paid for by the Coalition for America's Priorities.
It is true that repeal would benefit mainly the wealthy. The most recent statistics from the Internal Revenue Service show that the richest 520 estates, valued at $20 million or higher, paid a total of $5.6 billion in 2004. Another $3.2 billion was paid by 820 estates valued at between $10 million and $20 million.
We do fault the ad for implying that money will be taken away from Social Security, which is funded entirely by payroll taxes. The estate tax doesn't affect that program directly.
The American Family Business Institute, a single-issue group that has long pushed for total repeal of the tax, released an Internet ad distributed solely through conservative blogs. It calls on Sen John McCain to "keep his promise and vote to end the death tax forever." That mischaracterizes McCain's position. In the past McCain
has proposed retaining the tax for estates over $5 million, and as recently as last August we addressed ads running in New Hampshire from another conservative group saying "Senator John McCain wants to keep the death tax."
This ad relies on a Sept 5, 2005 Chicago Sun-Times article written by Robert Novak. Novak says McCain told him he would vote for cloture, which could help the advocates of repeal break any potential filibuster. However, Novak says in the same article that McCain has long opposed the full repeal of the estate tax and would be more likely to vote for a compromise bill.
AFBI Web Ad: "Promise"
Announcer: American family-business owners are counting on John McCain, counting on McCain to protect the jobs they create and the legacy they leave their children. Counting on John McCain to keep his promise and show the leadership he's known for.
(On Screen: Chicago Sun-Times masthead, "Robert Novak: McCain can't escape GOP reality;" "McCain told me he will vote for cloture.")
Counting on him to cast the deciding vote to end the IRS death tax forever.
(Text On Screen: www.nodeathtax.org)
Ask John McCain to keep his promise and vote to end the death tax. Tell John McCain it's important.
Tell him we're watching. Tell him we'll remember.
The AFBI also is running an ad, first announced in April, in the home states of Republican Sen. Olympia Snow of Maine and Democratic Sens. Max Baucus of Montana and Mark Pryor and Blanche Lincoln of Arkansas, hoping to influence their votes. The ad may air in additional states as well.
It falsely says the estate tax causes families to "lose everything they have to the cruel and unfair IRS estate tax." That's not possible.
For anyone who dies in 2006 the tax applies only to estates over $2 million (or double that for couples who make routine legal arrangements.) The threshold is currently scheduled to increase to $3.5 million ($7 million for couples) in 2009.
Above that level, the maximum rate of the estate tax is currently 46 per cent, with a reduction to 45 per cent scheduled for next year and thereafter.
It is true that the estate tax is a substantial burden on those with multi-million-dollar estates. But only a fraction of one per cent of all who die will pay any tax at all, and the rest will keep more than half of everything over the cut-off level.
What Farmers and Ranchers?
Another misleading claim is that the estate levy is "the tax farmers and ranchers fear the most." As we've pointed out elsewhere, very few farmers and ranchers pay
the estate tax, and repeal would benefit mostly those who hold wealth in the form of stocks, bonds and non-farm real estate. And more to the point, the ad's sponsor fails to document the claim that anyone "fears" the tax.
AFBI Ad: "American Families"
Announcer: When some Americans die, their families lose more than a loved one. They lose everything they have to the cruel and unfair IRS death tax.
(Text On-Screen: "The Death Tax...it's simply unjust" - Wall Street Journal)
The double tax that destroys family businesses. The tax farmers and ranchers fear the most. But now a bipartisan group of Republicans, Democrats and Nobel-Prize winning economists all agree, it's time to end this unfair tax.
(Text On Screen: "I will do everything in my power to bury the death tax once and for all" - Bill Frist; "The death tax...undermines the life work and life savings of Americans" - Rep. Sanford Bishop; "Death should not be a taxable event..." Nobel Prize Economist Milton Friedman)
Call today, and ask Sen. Lincoln to end the death tax.
The statement is based on a survey conducted by the polling firm Public Opinion Strategies in June 2005 and, according to AFBI, supported by a more recent Tax Foundation poll. Yet neither of these polls asked about "fear" and neither of them specifically target "farmers and ranchers." The Public Opinion Strategies asks respondents in Montana, Rhode Island, Louisiana, Oregon, Washington, and Arkansas:
Question 18: ...do you support or oppose repealing the estate, or death tax, that is to say the 47 per cent tax that some families must pay the federal government on anything of value they inherit from a deceased relative?
Note that the question gives respondents a false description of the tax, which only fell on amounts over $1.5 million at the time it was taken (2005) and not on "anything of value." Not surprisingly, given such a misleading question, 58 per cent of respondents said they supported repeal.
The Tax Foundation poll, published in March 2006 asked respondents:
Question 7: Of the following federal taxes, which do you think is the worst tax — that is, the least fair?
The estate tax led the way with 31 per cent of respondents ranking it first. However, thinking of a tax as unfair is not the same as being afraid of it. Also, neither survey asks respondents for their occupation, so the statement in the ad that this is the tax that "farmers and ranchers" fear most is unsupported.
- by James Ficaro and Brooks Jackson
Joel Friedman and Aviva Aron-Dine, The State of the Estate Tax as of 2006, Center on Budget and Policy Priorities ,31 May 2006.
Joel Friedman, Estate Tax Compromise with 15% Rate is Little Different than Permanent Repeal, Center on Budget and Policy Priorities , 31 May 2006
2006 Annual Survey of Attitudes on Tax Wealth, Tax Foundation , April 2006.
"Death Tax Poll," Public Opinion Strategies , 22-23 June 2005.
Robert Novak, "Nothing unifies Republicans more than the estate tax," editorial, Chicago Sun-Times , 5 Sept 2005
Mary Deibel, "'Death tax' debate heats up Senate," Scripps Howard News Service , 3 May 2006.
Internal Revenue Service, "Estate Tax Returns Filed in 2004," Statistics of Income Division, November 2005.