Federal Estate Tax Repeal, Part 11: The Vote Postponed, and The Wall Street Journal Speaks Up

I don't know if it's available online, but yesterday's Wall Street Journal had an editorial about estate tax repeal.  The editorial starts by saying that Senate Majority Leader Bill Frist has decided to delay a vote on repeal until September, and then launches into full attack mode against the estate tax. 

A few comments:

1. The Journal has a big problem with the revenue loss projections calculated by "the unelected number crunchers at the Joint Committee on Taxation (JCT)." 

a. You'll note the use of the word "unelected" here.  The Journal's idea is not that JCT employees should be elected, but rather to suggest (as the Journal does later) that JCT employees be replaced with "a staff whose predictions are at least in the same zip code of economic reality."  In other words, a staff whose predictions are approved of by the Journal.  Of course, such a staff also wouldn't be elected, but that's not really the point.  What's an activist judge?  A judge who rules in a way that I dislike.  What's an unelected government worker?  A government worker who does something (in this case, makes a calculation) that I dislike. 

b. I agree that it's important for us to have a clear picture of the revenue impact of estate tax repeal, but I differ with the Journal in how we obtain this picture.  They cite a study by an economist from the American Family Business Institute, to the effect that the JCT tends to overstate revenue loss from estate tax repeal, but I have to look at AFBI's website (aka "nodeathtax.org"), and wonder whether the group's agenda might have a little something to do with its economist's conclusion.  The Journal says the JCT ignores the impact of "faster economic growth, more savings, more job creation, and more capital investment that can be anticipated" by repeal of the estate tax, yet I wonder why the Journal makes no attempt to quantify this impact.  Are we simply to assume that the estate tax repeal will result in minimal revenue loss (or even a revenue gain) because the Journal says so?

2. The Journal states that there is "overwhelming support for repeal among voters," but I have to ask the basis for this opinion.  Were these polls also conducted by the AFBI?  It seems fairly easy to manipulate responses to an issue most people know very little about.  Will people dislike the estate tax more if I call it "the death tax"?  What if I misrepresent the number of Americans who will be subject to the tax?  On a similar note, the Journal says estate tax repeal "helped to defeat Tom Daschle in South Dakota last year."  However, when I look for evidence of taxable estates in South Dakota, all I can find is this study by AALU (the Association for Advanced Life Underwriting), which states (at the bottom of page 43) that about 74 estates per year will be subject to the tax from 2006-2020.  Did the voters of South Dakota really vote Tom Daschle out of office because he opposed the repeal of a tax that may affect 74 South Dakota estates per year? 

3. The Journal's position on capital gains strikes me as fairly inconsistent (remember that estate tax repeal would also repeal the current "step-up in basis" regime in large part).  In one paragraph, the Journal is criticizing the JCT for ignoring the revenue effect of the capital gains provision in the repeal bill.  Yet three paragraphs later the Journal argues that "[d]eath should not be a taxable event."  It seems to me that this latter position ignores the economic reality of the capital gains provision, namely that death will still be a taxable event for those who most need the money they are inheriting (i.e. most everyone but the super-wealthy). 

4. Near the end of the editorial, the Journal pulls out what appears to be the argument du jour against the estate tax: other countries don't have it.  Remember when the Journal (here) got up in arms over Justice Kennedy's referencing of international law in the juvenile death penalty case of Roper v. Simmons?  Back then, the Journal accused Justice Kennedy of being selective in his use of international law.  But isn't the Journal doing the exact same thing here?  More to the point, is it really relevant to use a list of countries without an estate tax, taken out of context with respect to things like budget deficits and income tax rates, in order to argue for repeal?

5. To me, the biggest question involving estate tax repeal focuses on whether those opposed to repeal will start using the same aggressive tactics as the pro-repeal crowd.  Yes, the estate tax affects a decedent's ability to give away property at death.  But can't it also be said to tax a less-protected type of income (namely, income that you never earned in the first place)?  If the pro-repeal crowd uses family farmers as their poster children, will the anti-repeal crowd begin to employ Paris Hilton and other spoiled heirs for the same purpose?