(CNSNews.com) - As the Senate moves closer to a vote on the estate tax this month, labor unions in some states are pressuring their senators to oppose eliminating the so-called "death tax."
The New Orleans chapter of the Service Employees International Union complained Wednesday about the alleged cost of an estate tax repeal or reduction to the already economically challenged state.
"The city and school support workers who make up SEIU Local 21 want to remind [Louisiana Sens. David Vitter (R) and Mary Landrieu (D)] that they barely make ends meet and the middle class is slipping away from them every day," Local President Maria Wickstrom said in a news release.
Estate taxes are assessed on property transferred after the owner's death.
In 2001, President Bush signed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), which set a schedule for the estate tax to be incrementally reduced between 2002 and 2009, with no estate taxes levied in 2010. Without permanent legislation to abolish the tax, it would return to pre-EGTRRA levels in 2011.
The Senate voted 57-41 not to repeal the tax in June. Later that month, the House passed the Permanent Estate Tax Relief Act of 2006 by a vote of 269-156.
Rather than repealing the estate tax, that proposal would increase the exemption levels to $5 million per person and $10 million per couple in January 2010, effectively reducing the number of people required to pay the tax.
The House proposal would also tax estates valued between $5 million and $25 million at the capital gains rate, which is currently 15 percent. Inherited property valued at more than $25 million would be taxed at 30 percent.
Wickstrom believes repealing the estate tax favors the wealthy and neglects working class Americans.
"The people of Louisiana elected our Senate leaders to look out for the interests of working families," she added, "not heirs and heiresses to the very rich."
The American Family Business Institute (AFBI), which favors repealing the tax, said what it calls the "death tax" targets family-owned, income-producing properties, and therefore, damages the economy.
"That hit [to the economy] comes because it takes capital directly out of family businesses and farms at the most vulnerable time," Josh Kahn, AFBI communications director, told Cybercast News Service in a May 26 interview.
"In addition to that, they're spending money for years before someone passes away on life insurance schemes in order to avoid as much of the tax as possible, and that money would have gone to expanding their businesses and creating more jobs," Kahn added.
But Emma Dixon, Louisiana estate tax organizer for United for a Fair Economy, said such claims are misleading and are designed to garner sympathy.
"Most of the small family farmers are not millionaires anyway, so that just throws that out of the business," Dixon told Cybercast News Service. "And the same would apply for small, fledging businesses. Those people are not millionaires."
The debate over the estate tax is especially significant for Louisiana, where many people are still struggling to recover from Hurricane Katrina, Dixon said.
"That money [from the estate tax] goes to fund education, college tuition for kids who can't afford to pay for college ... nutrition programs to help feed the hungry, and it also pays for our uninsured children's health care," Dixon said. "Those are all very important issues here in Louisiana."
Landrieu, who has said she opposes repealing the tax, introduced her own version of the relief act in June. Unlike the House plan, it imposes a 35 percent tax rate on estates exceeding exemption levels and a surcharge of 5 percent on those worth more than $100 million.
"It gives most opponents of the estate tax what they want: a significant tax cut. It gives most reformers what they want: a stable and predictable system that enables long-term estate planning," Landrieu said in a statement in June.
"It gives most small business people and farmers what they want: a chance to keep what they have built up in their families over a lifetime of hard work," Landrieu added.
The state's senior senator said she opposes full repeal, because it is not "fiscally responsible" in light of the federal deficit, the war on terror, and costs of the ongoing Gulf Coast hurricane recovery.
Dixon argued, however, that any proposal that reduces the revenue produced by the estate tax is unacceptable.
"Landrieu has been extremely vigilant in helping to bring funds to Louisiana, especially after Katrina, but this proposal on the estate tax - it's not going to help very much," Dixon added, "There's [sic] a lot of people in Louisiana ... who do not want to see this happen."
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