Copyright 2000 Journal Sentinel Inc.
Milwaukee
Journal Sentinel
July 16, 2000 Sunday ALL EDITIONS
SECTION: CROSSROADS; Pg. 01J
LENGTH: 601 words
HEADLINE:
Why Clinton will veto the estate tax bill
BYLINE:
LAWRENCE H. SUMMERS
BODY:
Last week, the Senate
passed legislation that over time would repeal the estate tax at an ultimate
cost to the Treasury of more than $50 billion a year.
While the Clinton administration supports measures to reduce estate tax
burdens, especially on small businesses and family farms, the president has made
it clear that he will veto legislation eliminating the estate tax.
We
are committed to working with Congress to provide targeted estate tax relief.
For about one-fifth of the phased-in cost of repeal of the estate tax, we can
help family farms, small businesses and those whose homes have increased
significantly in value, and simplify the system and remove from the tax rolls
roughly half of those who now pay the estate tax. This targeted reform is a goal
that the administration is prepared to address in a bipartisan way this year.
In contrast, repeal of the estate tax would undermine our fiscal
discipline, compromise our national priorities, damage our philanthropic
institutions and reduce the progressiveness of the tax system.
The
estate tax repeal measure passed by the House would cost about
$750 billion between 2011 and 2020, more than seven times its
cost in the first 10 years. If it were to be enacted, it might be the most
back-loaded piece of major tax legislation ever.
Moreover, the growing
budget pressure would come early in the next decade, just as the baby boomers
start to retire. The result would be reduced pay-down of the debt, increased
interest rates and reduced investment.
There is also the question of
priorities. Resources devoted to estate tax repeal are not
available to pay down debt, to fortify Social Security and Medicare or to
provide tax relief for middle income families.
The phased-in cost of
repeal -- beyond the cost of reform -- would be enough to provide for a
comprehensive program of tax relief for American families, including enhanced
tax credits for child care, new college tuition deductions, retirement savings
accounts, long-term care credits and reduction in the marriage penalty.
Alternatively, the phased-in cost of estate tax repeal is
enough to provide a much needed Medicare prescription drug benefit.
The
estate tax repeal would have other unintended effects. As
research by leading economists has demonstrated, the charitable deduction under
the estate tax has historically been a major spur to philanthropy. Repeal would
dim these thousand points of light by reducing philanthropic giving by as much
as $6 billion a year.
Finally, there are the issues of
progressiveness and fairness. The estate tax originally was put in place as a
backstop for -- and a complement to -- the progressive income tax. It affects
only 2% of estates, and nearly half of estate tax revenue comes from the largest
1-in-1,000 estates.
The concentration of the benefits in a small portion
of the population is no argument against addressing estate tax inequities. But
it does point up the desirability of targeting estate relief and for achieving
balance across the population in any tax legislation.
In this new era of
surpluses, Congress faces profound economic choices that will affect all
Americans. There is a strong case for targeted relief, but to put repeal ahead
of increasing the minimum wage, putting in place a patients' bill of rights,
giving tax relief for middle-income families and strengthening Medicare and
Social Security would be to sacrifice the economic interests of most Americans.
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Lawrence H. Summers is secretary of the Treasury.
This article first appeared in The Washington Post.
LOAD-DATE: July 16, 2000 
