By Gary Bass and Anna Oman
Majority Leader Bill Frist wanted to hold a vote to repeal the estate tax last fall.
Because of Hurricane Katrina, however, the Senate’s calendar was too full — and, well, a give-away to heirs of multimillion-dollar fortunes that would add a trillion dollars to the deficit was pretty unseemly at the time.
Now that enough time has passed, the Tennessee Republican is back at it, promising to schedule a vote that will “kill the death tax forever” — and nonprofits should be very concerned.
First, there’s the direct hit charities would take.
Though rarely reported, the estate tax provides a huge incentive for charitable giving.
The estate tax allows unlimited assets to be donated to charity to reduce the size of one’s taxable estate.
Without the estate tax and its incentive for giving, the nonprofit sector would lose $13 billion to $25 billion a year in bequests and donations.
Then, there’s the indirect cost of repeal.
Full repeal of the estate tax would cost the federal government $1 trillion over the first 10 years.
Unless the Treasury magically finds itself with a budget surplus in the near future, that money must be made up somewhere else.
The bottom line is that estate-tax repeal will ultimately be paid for by cuts to important social investments, by increased taxes on middle- and low-income families down the road, or by our children.
Estate-tax repeal would mean untold billions in essential government funding lost to deficit-reduction budget cuts: When our universities, parks, and cultural institutions suffer, we all lose.
Even worse, those cuts will be directed disproportionately toward programs serving vulnerable populations, who aren’t backed up by a powerful lobby.
Finally, there’s the assault on founding values of many organizations and all faith-based charities — humility and the duty of everyone to lend a helping hand.
The estate tax, in the words of Bill Gates Sr., is the most important way for incredibly wealthy families to give back to, and express their gratitude for, the nation that made their vast wealth possible — and, in doing so, ensure that the opportunity they had will be available to all hardworking Americans.
Despite the moral and economic value of the estate tax, the nonprofit community, except on certain occasions, has not spoken out to preserve it.
And, as we’ve remained silent, some pretty powerful interests have steered the debate.
There are the 18 families, owners of such American mainstays as Wal-Mart and Campbell’s Soup Co., who stand to win big from repeal and have for years been pouring millions into campaigns against the tax.
This could be the issue’s defining moment: Frist and his allies sense they are losing ground, as Americans learn about the tax and about the nation’s current financial situation.
Frist knows he needs to act, but also that he doesn’t have the 60 votes for full repeal.
So what he and his anti-tax allies will do is push for so-called “reform” legislation — a plan for backdoor repeal put forward by Sen. Jon Kyl, an Arizona Republican, and billed as a “compromise” that would effectively gut the estate tax.
The charitable community, now more than ever, needs to make its voice heard.
Gary D. Bass is founder and executive director of OMB Watch in Washington, D.C. Anna Oman is communications coordinator.