The conservative Free Enterprise Fund (FEF) continues to push for permanent repeal of the federal estate tax with one of the most blatantly false advertising campaigns we’ve seen this year.
One recent TV ad repeats an utterly untrue claim that the estate tax can “rip away 55 per cent of what you save for loved ones.” In fact, the tax takes zero percent from all but a very few. Even multimillionaires pay an average effective tax rate estimated currently at less than 22 per cent of their estates.
The ads are particularly nasty in their tone as well. One portrays Democratic Sen. Maria Cantwell of Washington as a carrion bird, saying “she voted with the vultures” to oppose consideration of estate-tax repeal. Another attacks Democratic Sen. Mark Pryor of Arkansas for supposedly going back on a promise to support repeal, saying “Pryor is a liar.” Actually, Pryor is on record opposing total repeal, though a statement on his Web site can easily be read to imply the opposite.
For months the Free Enterprise Fund has been running what it says is a $4.1 million campaign to kill the federal estate tax for good. So far this year the FEF says it has run ads nationally on Fox News and in seven states: Arkansas, Louisiana, Montana, Rhode Island, North Dakota, South Dakota and Washington. We’ve noted some of their distortions before. They’re still putting out false information.
Free Enterprise Fund Ad:
(On Screen: Vultures circling overhead, then feeding on a carcass.)
Announcer: When the vultures circle, it means they’ve come to take their share of your savings.
The death tax can rip away 55% of what you save for loved ones.
It’s a vulture of a tax, on your home, your business, the family farm, everything.
When the Senate voted on ending the death tax, the vultures wanted to keep feeding on your savings. Maria Cantwell voted to keep the death tax. She voted with the vultures.
(On Screen: Maria Cantwell’s head superimposed on the body of a vulture)
Announcer: Tell her, it’s time to end taxation without respiration.
In ad after ad, FEF has repeated a false claim that the estate tax can take 55 percent of “what you save.” The latest version shows vultures feeding on carrion, and superimposes the head of Sen. Cantwell on a bird’s body and says she “voted with the vultures” to prevent Senate consideration of a repeal measure.
The problem with this and several earlier FEF ads is that there is no way that even a billionaire would lose 55 per cent of their estate to the federal tax. The current top marginal rate is 46 per cent, for one thing. That rate doesn’t apply to the entire estate, only to amounts above a specified level. As we have pointed out before, for anyone who dies in 2006 the tax applies only to amounts over $2 million (or $4 million for couples who take advantage of estate-planning legal maneuvers.)
So – just to be clear – that means that for the vast majority of Americans the estate tax will take zero per cent. Just over one per cent of Americans who died in 2002 owed any estate tax at all, according to the most recent figures from the Internal Revenue Service. That was when only the first $1 million was exempt. Now that the exemption has doubled, experts at the nonpartisan Tax Policy Center calculate that only 12,600 Americans who die in 2006 will owe any estate tax at all. That’s roughly one in every 200. Furthermore, even for those affluent few, the Tax Policy Center estimates that the estate tax will take an average of 18.7 percent. Even for estates valued at over $20 million, the average tax will be 21.7 percent.
We asked the Free Enterprise Fund to show us how it would be possible for the estate tax to take 55 per cent of anybody’s estate, and they did not do so. Instead, FEF policy analyst Marco DeSena pointed to “the 55 per cent estate tax rate that will be imposed when the current law runs out in 2010.” That doesn’t come close to backing up the ad’s claim, however.
It is true that the estate tax currently is scheduled to be repealed for one year only, 2010, and then return at a top marginal rate of 55 per cent in 2011. But that rate would not apply to the entire estate. The first $1 million would be completely exempt ($2 million for a couple), and the rate on amounts over that would go up in stages before reaching the maximum. Even a billionaire who engaged in no estate planning couldn’t possibly lose 55 per cent of everything.
It’s unlikely the 55 percent rate will ever come back. The House approved a permanent reduction in the estate tax on June 22 by a bipartisan vote of 269 to 156. It would exempt all estates under $5 million from any tax, and sharply reduce rates, to 15 per cent for most taxable estates. A majority of Senate members are also on record favoring either a reduction or repeal of the estate tax, and a motion to cut off a Democratic filibuster and take up a repeal bill fell only three votes short of the required 60 votes on June 8. FEF says even the House measure is not enough. They are holding out for no tax at all, even for billionaires.
Who’s A Liar?
Another recent FEF ad running in Arkansas attacks Sen. Mark Pryor for voting to block consideration of a repeal bill on June 8. The announcer says, “Tell Mark Pryor he’s a liar.”
Free Enterprise Fund Ad:
“Pryor the Liar”
Announcer: Mark Pryor is unbelievable. First Pryor says, ‘I support the permanent repeal of an estate tax that harms small businesses and family farms.’ Then he votes against repealing it. Tell Mark Pryor he’s a liar.
(On screen: ‘Pryor is a liar’)
What the 15-second ad claims to be a lie is a statement on Pryor’s Senate Web site saying (as of June 24): “I support the permanent repeal of an estate tax that harms small businesses and family farms.” It is true that Pryor’s statement is worded in a misleading way, and could easily give the impression that he supports total repeal of the entire estate tax. However, he’s stated clearly on other occasions that he supports “repeal” for farmers and small-business owners only, and opposes repeal of the entire tax. Even the statement on his Web site refers to repealing “an” estate tax, and not “the” estate tax.
Pryor has made no secret of his opposition to blanket repeal. On Nov. 7, 2005, the Arkansas Business newspaper reported: “Even Democratic U.S. Sens. Blanche Lincoln and Mark Pryor are divided. Pryor opposes the repeal, while Lincoln is for it. Another home-state newspaper, the Arkansas Democrat-Gazette, said in an editorial on June 14 that “we’d been under the impression he’d been for only partial repeal all along.”
Foes of the estate tax were well aware that Pryor was not supporting total repeal. Americans for Tax Reform, noting the Arkansas Business story, issued a statement just before the June 8 Senate vote saying Pryor favored “reform” and noting that the state’s other senator “has gone one step further and claims she is for outright repeal.”
What Pryor means by “repeal” for farmers and small-business owners is not entirely clear. He told Arkansas Business in a prepared statement that while he generally opposes repeal, “I do, however, fully support raising the estate tax exemption high enough to protect our [farm] producers and small businesses from being harmed.” He did not specify what exemption level he favored, though presumably it would be higher than the $3.5 million ($7 million for a couple) that is scheduled to take effect in 2009. Whether a higher exemption amounts to “repeal” for farmers and proprietors is a matter of interpretation. And whether the misleading statement on Pryor’s Web site is simply a result of clumsy wording, or of a sly intent to deceive, we leave to the judgment of our readers.
Watch Free Enterprise Fund Ad: “Vultures”
View Free Enterprise Fund Ad: “Pryor the Liar”
Tax Policy Center, Table T06-0020, “Current Law: Distribution of Gross Estate and Net Estate Tax By Size of Gross Estate” 23 Jan 2006.
“Web site wobbling; Mark Pryor’s Clinton clause,” Arkansas Democrat-Gazette (Little Rock), editorial 14 June 2006
Mark Friedman, “Future of Federal Estate Tax Up in Heir,” Arkansas Business, 7 Nov 2005: A1.
Table 17 .–“Taxable Estate Tax Returns as a Percentage of Adult Deaths, Selected Years of Death, 1934-2002,” Internal Revenue, Statistics of Income Winter 2005-2006 Bulletin, Publication 1136
Bloomberg News, “House Approves Legislation That Limits Reach of U.S. Estate Tax,” 22 June 2006.