The Center on Budget and Policy Priorities has released New Estate Tax Rules Should Expire After 2012: Shrinking the Tax Beyond the 2009 Level Is Unaffordable and Unnecessary:

The tax-cut compromise enacted in December established estate tax rules for 2011 and 2012 that are considerably weaker than those in effect in 2009, the last year before the tax temporarily expired in 2010. The new rules will cost about $23 billion more than reinstating the 2009 rules over the same two years, yet will benefit only the largest one-quarter of 1% of estates, since they are the only ones that that would owe any estate tax under the 2009 rules.

Taxable estates will receive more than $1 million apiece in tax breaks this year from the new rules, on average, and estates worth more than $20 million will receive an average of nearly $3.8 million apiece. In light of the nation’s serious long-term budget problems — and proposals to slash a wide range of government services, particularly Medicare, Medicaid, and programs for low-income Americans — it would be irresponsible to extend these new rules beyond 2012.

2009 Rules Were More Than Generous

 

Estate Tax Serves as Backstop to Capital Gains Tax

 

Not only does the estate tax provision of the tax-cut compromise provide unnecessary largesse to the wealthiest estates in the country, but it is also costly. The Joint Tax Committee estimates the cost at $68 billion compared to letting the pre-2001 rules return. We estimate it would have cost about $23 billion less to reinstate the 2009 rules for the same time period. Moreover, if extended over ten years, the new rules would cost about another $80 billion more than maintaining the 2009 rules over that period.

Providing tens of billions of dollars in new tax windfalls to the largest one-quarter of 1% of estates would be difficult to justify in the best of times. It would be particularly gratuitous in the current fiscal context, when policymakers are starting to make substantial cuts in a range of government functions and are talking of deep cuts in areas ranging from education to infrastructure to Medicare to programs that help the poorest Americans meet basic necessities.