Two different takes on the possibility of estate tax repeal in today’s Wall Street Journal and Washington Post:

Dying for Dollars, Wall Street Journal:

The Senate takes up death tax repeal this week, and it could be a cliffhanger. Sixty votes are needed to defeat a liberal filibuster, and we’re told 56 Senators have indicated they’ll vote for repeal, with another six undecided. The House has already passed repeal, 272-162, with 42 Democrats voting yes.

In TV and radio ads, death tax defenders claim repeal will rob the Treasury and force Congress to slash Social Security and Medicare, if not close Mount Rushmore. The official number crunchers at the Joint Committee on Taxation (JCT) claim repeal would cost about $600 billion over 10 years. That’s a big number, even for Washington, and it is clearly frightening some Senators. Democrat Evan Bayh of Indiana, for one, says he favors repeal in principle but is nervous about potential revenue losses. There’s just one problem with the JCT’s calculations: They aren’t anywhere close to reality. And the JCT’s own numbers prove it. Mr. Bayh and his Senate colleagues deserve to know this full story before they cast their votes.

The current death tax repeal bill contains a compromise worked out in the late 1990s between then-Senator Bob Kerrey of Nebraska and Jon Kyl of Arizona. Moderate Democrats agreed to support repeal if Republicans agreed to eliminate a provision of the tax code allowing for what is called the "step-up-basis at death on capital gains." Under current law, the value of inherited assets — say, General Electric shares — is "stepped up" to the market price at the time of death. This means that no capital gains tax is applied to the increase in the value of the stock or business over the original owner’s lifetime. So if grandma bought GE at $5 a share and the price at her death is $50 a share, her heirs pay no capital gains tax on the $45 increase in value.

The bill to repeal the estate tax would change this to require that the current 15% capital gains tax be paid on the full increase in the asset price from the time it was originally purchased. As a policy matter, this seems a fair trade: The 15% capital gains rate is substantially lower than the nearly 50% current death tax rate, and the government would get a share of the gain of heretofore sheltered assets. Joint Tax estimators have calculated that changing this capital gains treatment of inherited assets would raise $50 billion to $60 billion a year, assuming no behavioral changes. And here’s the catch: This is more than the $30 billion or so the tax actually raises each year.

Reward for the Hereditary Elite . . ., Washington Post, by Sebastian Mallaby:

It doesn’t matter if you are liberal or conservative, Democrat or Republican. There is no possible excuse for doing what Congress is poised to do this week: Abolish the estate tax….

For most of the past century, the case for the estate tax was regarded as self-evident. People understood that government has to be paid for, and that it makes sense to raise part of the money from a tax on "fortunes swollen beyond all healthy limits," as Theodore Roosevelt put it. The United States is supposed to be a country that values individuals for their inherent worth, not for their inherited worth. The estate tax, like a cigarette tax or a carbon tax, is a tool for reducing a socially damaging phenomenon — the emergence of a hereditary upper class — as well as a way of raising money….

I’m fascinated by the spectacle of elite support for this policy. How can the president and the abolitionists in Congress, who understand the tax and its details, possibly want to kill it? They all say they accept the principle that the tax system should be fair — Bush officials are constantly claiming that their tax cuts are progressive. They all accept the principle that free trade and competition get the best out of American firms, so what about subjecting rich heirs to competition from ordinary Americans? Repealing the estate tax is like erecting protectionist barriers around the hereditary elite. It is anti-meritocratic and unfair — and antithetical to this nation’s best traditions.