Death, taxes, and George W. Bush

Death, Taxes, and George W. Bush

The contrast in President Bush's new budget could not be more stark. On one hand, he wants to eliminate what he likes to call the "death tax" -- a levy imposed on a handful of the nation's biggest estates. On the other, he wants to end Social Security's lump sum death benefit -- a $255 check that the families of many of the nation's poorest use to help pay for their funerals.

There is a lot more in Bush's $2.77 trillion budget than that, of course. He'd boost spending for homeland security and the Pentagon, trim many popular domestic programs, and control the growth of Medicare by boosting premiums for high-income seniors and freezing or cutting payments for health providers, such as doctors, hospitals, and hospices. At the same time, the President asked Congress to make most of his first-term tax cuts permanent.

ESTATE PLANNING. That includes permanently eliminating the estate tax, or what conservatives like to call the death tax. Like most of what happens these days in the tax world, the story is complicated, but it goes like this: Starting in 2001, Congress began to gradually increase the size of an estate that would be exempt from tax. By 2009, estates of $3.5 million or less ($7 million for a couple that does the smallest bit of planning), would be tax-free. By 2010 all estates would be exempt from the tax, but only for one year.

So President Bush wants to permanently free all estates from the tax starting in 2011. The estimated annual cost: in excess of $50 billion in 2012, rising to more than $70 billion by 2016.

It is hard to know how many families will get the tax break at the end of the decade. But this year, of the 2.4 million people who are expected to die, only about 6,500 estates will be subject to the tax.

RICH MAN, POOR MAN. Then there is Social Security's lump-sum death benefit. That widow's check is only $255 and is probably of little interest to those people who worry about estate taxes. But for very poor families, it can be a big deal. It is often used to help pay for a funeral at a time when many families have no other cash.

According to the Bush budget, the benefit would be eliminated "because it no longer provides a meaningful monetary benefit for survivors yet requires significant administrative resources." The Social Security Administration estimates that eliminating the benefit would save the government about $190 million next year.

A spokesman says the benefit has not been increased since 1954 and "no longer bears a relationship to funeral costs." Now Congress will have to decide whether it wants to slash a small benefit that means so much to the very poor. And whether, at the same time, it wants to cut taxes for a handful of heirs of the very rich.
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Wealthy heirs get tax relief. Poor widows get benefits cut.

Further commentary seems almost superfluous.