The same people who insist that critics of Social Security privatization should offer reform proposals of their own are working feverishly to eliminate alternatives that might reduce the need for benefit cuts or payroll tax increases.
I refer to the fact that House Republican leaders have scheduled a vote this week to abolish the estate tax permanently. Under a wacky provision of the 2001 tax cut designed to disguise the law's full cost, Congress voted to make the estate tax go away in 2010, but come back in full force in 2011.
With so many other taxes around, it's hard to understand why this is the one Congress would repeal. It falls, in effect, on the heirs to the wealthiest Americans. Fewer than 1 percent of the people who died in 2004 paid an estate tax, and half the revenue from the tax came from estates valued at $10 million or more.
Yet, because the wealthy have gotten wealthier over the past three decades or so, the estate tax produces a lot of money. Counting both revenue losses and added interest costs, complete repeal of the estate tax would cost the government close to $1 trillion between 2012 and 2021, according to the Center on Budget and Policy Priorities.
And that is where Social Security comes in. You can reject outlandish claims that Social Security faces some sort of "crisis" and still acknowledge that it faces a gap in funding for the long haul. The estate tax should be part of the solution.
In a little-noticed estimate confirmed by his office yesterday, Stephen Goss, the highly respected Social Security actuary, has studied how much of the Social Security financing gap could be filled by a reformed estate tax. What would happen if, instead of repealing the tax, Congress left it in place at a 45 percent rate, and only on fortunes that exceeded $3.5 million -- which would be $7 million for couples? That, by the way, is well below where the estate tax stood when President Bush took office and would eliminate more than 99 percent of estates from the tax. It reflects the substantial reduction that would take effect in 2009 under Bush's tax plan.
According to Goss, a tax at that level would cover one-quarter of the 75-year Social Security shortfall. The Congressional Budget Office has a more modest estimate of the shortfall. Applying Goss's numbers means that if CBO is right, the reformed estate tax would cover one-half of the Social Security shortfall.
This is big news for the Social Security debate. Michael J. Graetz and Ian Shapiro, authors of a new book on the estate tax, "Death by a Thousand Cuts," have referred to its repeal as the "Paris Hilton Benefit Act." To pick up on the metaphor, why should Congress be more concerned about protecting Paris Hilton's inheritance than grandma's Social Security check? How can a member of Congress even think about raising payroll taxes while throwing away so much other revenue?
This also means that Democrats now talking about reaching a "compromise" with the Republicans on the estate tax should put the discussions on hold until the Social Security debate plays itself out. Most of the "compromises" being discussed would repeal 80 to 90 percent of the estate tax. At some point, it might be reasonable to agree to make the 2009 estate tax levels permanent. But if they agree to any steps beyond that, Democrats will, once again, be placing the concerns of wealthy donors over the interests of the people who actually vote for them.
The Friends of Paris Hilton realize that as federal deficits mount and rising Medicare costs loom, the case for the total repeal of the estate tax grows steadily weaker. That's why they're hoping they can sucker defenders of estate taxes into a so-called compromise that gives away the store -- the store, in this case, going to Neiman-Marcus shoppers, not to those who rely on Target.
This is an instructive moment. What we are having is not a real debate on the future of Social Security but a sham discussion in which the one issue that matters to the governing majority is how to keep cutting taxes on the wealthiest people in our country.
Those who vote to repeal the estate tax this week will be sending a clear message: They see the "crisis" in Social Security as serious enough to justify benefit cuts and private accounts. But it's not serious enough to warrant a minor inconvenience to those who plan to live on their parents' wealth.