Interest article this afternoon in Bloomberg, by Ryan Donmoyer: Bush Panel’s Savings Plan May Weaken Case for Estate-Tax Repeal:

A presidential advisory panel’s recommendation to expand tax-free investment accounts, long one of President George W. Bush’s goals, may weaken arguments for another of his top priorities: repeal of the estate tax. The panel’s proposals undermine the case made by Bush and others that Americans shouldn’t be taxed on what they earn during their lifetime and again on those assets at death, analysts said. And it may give congressional Democrats who favor retaining the estate levy more reason to oppose a Bush proposal that would simultaneously reduce taxes on savings and repeal what detractors call the "death tax."

"If you’re not going to tax capital during a person’s lifetime, that eliminates the double-tax argument about the estate tax,"’ said Yale University Professor Michael Graetz, co- author of the book Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth [blogged here]. Graetz was former President George H.W. Bush’s top tax policy official from 1990 to 1992….

"The discussion about the death tax, as some refer to it, really did not come up, and we did not pursue it," panel Chairman Connie Mack, a former Republican senator from Florida, said after he presented the report to Treasury Secretary John Snow on Nov. 1. Mack said the estate tax was one of many "unanswered questions" about the plan….

The administration will still be under pressure to revive its efforts to repeal the estate tax in any fundamental tax code rewrite because its opponents have so successfully framed the issue in philosophical terms that death shouldn’t be a taxable event, Graetz said. "Proponents of repeal, particularly the small business community, were so important to getting the president’s 2001 legislation through Congress, and for them repeal of the estate tax is a huge priority," he said.

Joel Slemrod, a former member of President Ronald Reagan’s Council of Economic Advisors who now directs the Office of Tax Policy Research at the University of Michigan in Ann Arbor, said a system that spares both investment income and estates from tax gradually shifts the overall burden from rich to poor. "Getting rid of it would disproportionately benefit high- wealth, high-income people," Slemrod said of the estate tax. He noted that Bush instructed his tax-advisory panel to devise proposals that keep tax burden distributions relatively similar to what they are now, a position from which it will be hard for him to retreat.