Bush Panel's Savings Plan May Weaken Case for Estate-Tax Repeal

[papau]

Rich don't pay while alive, so why not pay tax on the way out?

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=IPEZOR0D9L35

Bush Panel's Savings Plan May Weaken Case for Estate-Tax Repeal

By Ryan J. Donmoyer
Nov. 4 (Bloomberg) -- 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.'' Graetz was former President George H.W. Bush's top tax policy official from 1990 to 1992.

The panel's proposals would allow a two-income couple to save as much as $70,000 annually in accounts with no taxes on yearly returns or withdrawals. A married couple saving the maximum annually and earning a 7 percent rate of return without making withdrawals would amass $6.6 million after 30 years, four times the amount that triggers the estate tax under current law. <snip>