As national debate continues over the repeal of the federal estate tax, it is upsetting to observe how such a government decision could affect Oregon citizens and University students.
The estate tax – spun by the current administration as a “death tax” – allows the government to tax a person’s property, cash and other assets after they die at rates up to 47 percent, but only if those assets total more than $1.5 million.
It should be clear from this statistic that this tax only affects a select group of wealthy individuals. In fact, estate taxes have only applied to the wealthiest 2 percent of Americans in recent years, according to the Congressional Budget Office.
Yet lawmakers in Washington, including Sen. Gordon Smith, R-Ore., continue to campaign for repealing the tax. They say it hurts small business owners and farmers.
Although determining the exact effects of the estate tax is difficult, calculations suggest just the opposite – that abolishing the estate tax will benefit few farmers and entrepreneurs while potentially limiting a much-needed source of income for Oregon and public universities, including this one.
Foremost, we must question why Republicans in the House of Representatives chose to rekindle this debate last spring. Iraq war debt, financed by emergency loans to the tune of roughly $300 billion, had already caused our national debt to skyrocket. Moreover, Bush tax cuts had already decreased revenue using the misguided philosophy that cutting taxes will spur our national economy. Didn’t anyone pay attention to the section of high school economics class about Reaganomics?
Moreover, the estate tax has already been reformed under the Bush administration. During the final year of the Clinton era, the tax applied to people who made $650,000 or more, according to the CBO. Following the Economic Growth and Tax Relief Reconciliation Act of 2001, the amount of assets exempt from the tax is scheduled to rise until 2009, at which point the tax will equal about 45 percent of an estate’s assets worth more than $3.5 million.
Even ignoring historical implications, we must remember our nation remains in the midst of a serious deficit. Costs from Hurricanes Katrina and Rita continue to mount while neither the House nor the Senate offers any tangible method to finance rebuilding efforts.
Closer to home, some experts predict repealing the estate tax would slash Oregon’s revenues. Should the federal government stop collecting the death tax, every state will have to deal with the financial ramifications of such a move.
Likewise, the effect of a federal tax repeal upon our University can only be detrimental. We increasingly rely on private donations to construct new facilities and improve our University. Some donations are made after people die, and some of this giving is likely spurred by the fact that charitable contributions are tax write-offs. If the tax is repealed, the incentive to donate may decline, leading to fewer donations.
The University, Oregon and the nation simply cannot repay its debt or begin to thrive without the assistance of tax revenue. Now is not the time to repeal the estate tax, and we urge Smith to consider who will benefit if the tax is repealed. Hint: It’s not University students, and it’s not average Oregonians.