Friday, March 09, 2007

By Their Fruits You Will Know Them Part II: The 0.3% Doctrine

Like I said before: it's all about priorities.

To the Bush administration, providing our wounded veterans with adequate health care and benefits is not as high a priority as ensuring that the very wealthiest Americans get repeated tax breaks to the tune of trillions of dollars. From the Bush administration's vantage point, I guess, compared to wounded vets, life is unduly difficult for those debutantes, rich kids and other assorted jet setters. As Grover Norquist would lament, even Paris Hilton sings the blues.

The evidence of these perverted loyalties is damning.

While our returning soldiers languish neglected and confounded by a labyrinth of broken promises and red tape, the Bush administration continues to fight tooth and nail for things like...the permanent repeal of the estate tax. For those not familiar with that little tax law nicety, let me give you a brief history in quasi-layman's terms.

As the law now stands, the estate tax only applies to estates that have a value in excess of $2 million (this threshold goes up to $3.5 million in 2009). What this means is that there is no estate tax at all for an estate valued at $2 million or less. If you die and don't have over $2 million in assets (after deductions), then your estate owes nothing. Zip. Nada.

As you can see, this type of tax, by definition, only applies to the most fortunate among us. You have to have millions to be so unlucky. Myself: I aspire to, someday, leave my children with the hardship of taxes being assessed on my multi-million dollar estate. Poor them. As it stands, I'm more student loan debt battler than tycoon. But back to the estate tax chicanery.

As mentioned, if the decedent was able to amass an estate with a value greater than $2 million, and that person wasn't siphoning enough of those assets into tax shelters or just giving the money away tax free during their lifetime, then their heirs and heiresses would have the hard luck of taxes being taken out of the estate.

But, and this is an important but, taxes would only be assessed on the amounts that exceed the $2 million threshold. So an estate valued at $3 million would have taxes assessed on only $1 million of that total, with the first $2 million still enjoying tax free status. Not so bad really.

Now rewind to 2001. When faced with the harsh reality that the estate tax threshold was set at a meager $675,000 in 2001 - with a gradual rise to $1 million in 2006 built in to then existing law - the Bush administration snapped into action. This injustice could not stand.

So, in 2001, the Bush administration passed legislation that jacked the threshold up to $1 million in 2002, with stepped increases up to $2 million in 2006, $3.5 million in 2009 and, then, the climax: a full repeal of all estate tax in 2010 (the Bush legislation also reduced the top marginal rates to further soften the effects of the taxes themselves).

One catch, though: there is a sunset provision built into the law so the estate tax resurrects in 2011 at the $1 million dollar threshold amount. Concerned with the specter of the eventual return of the estate tax, the Republican Party dedicates time and resources to an annual legislative push to make the estate tax repeal permanent.

Why the sense of urgency for a piece of tax cutting legislation that only benefits the wealthiest Americans you ask? Good question. The GOP even rejected compromise legislation that would keep the threshold at $3.5 million after the sunset. Kevin Drum spells out what life would be like under the compromise legislation:

- 99.7% of all estates would pay no tax at all.

- Only 50 (that's "fifty," not "fifty thousand") farms and small business would owe any estate tax.

- Conversely, repealing the estate tax entirely would cost nearly $1 trillion over ten years. That's "trillion," not "billion."

One trillion dollars. Hmmm. What could we do with $1 trillion dollars other than divert it to those poor souls inheriting money from the wealthiest 0.3% of all estates?

Fred Kaplan has some suggestions:

Consider the following facts from the fiscal year 2008 budget proposal, which the White House submitted to Congress just last month.

The Pentagon's Defense Health Program—which includes the Tricare health-insurance plan, used by 9.1 million veterans and involving 65 inpatient clinics, 414 medical and dental clinics, and 257 veterans centers—has actually had its budget cut the past two years. In fiscal year 2006, the program's budget for medical care went up from $15.9 billion to $21.2 billion. But since then, it's gone down slightly—to $20.8 billion in FY 2007 and a proposed $20.7 billion in FY 2008.

These numbers understate the magnitude of the cuts. To keep up with inflation in the cost of goods and payroll, the Defense Department actually had to cut medical-care programs by $1.6 and $1.4 billion in FY07 and FY08, respectively.

Money is similarly tight at the Department of Veterans Affairs. The VA's budget for medical care has risen in the past few years—from $28.8 billion in FY 2006 to $29.3 billion in FY 2007 to a request for $34.2 billion in FY 2008—but this hasn't been enough. In each of the past four years, according to a March 1 report by the Senate Committee on Veterans' Affairs, the VA has systematically underestimated the number of veterans applying for benefits in the coming fiscal year. The result is a shortfall of $2.8 billion in the FY08 budget, just to cover the current level of medical services.

The administration is trying to make up for some of this by raising deductibles on prescription drugs (from $8 to $15) and by imposing an annual enrollment fee (ranging from $250 to $750)—in short, by shifting costs to the veterans themselves. (Even so, these charges would make up only $450 million, or about one-sixth of the shortfall.)

Another instance of ignoring the wars: Despite a vast increase in the number of returning soldiers coming to the VA's veterans centers, the budget for these centers has remained flat. Similarly, despite a vast increase in the number of soldiers filing disability claims, the VA budget includes no money for additional claims processors. To justify the lack of money for trained processors, the VA's budgeteers assume that the number of new claims—and the backload of past claims—will drop in 2008. This is patently ridiculous: Elsewhere in the budget (see page 1-2), they state, "[W]e project that VA's patient caseload will peak in 2010" (emphasis added). In other words, they predict a rising caseload for another three years—but cut the money for the caseload this coming year.

An even grander sleight of hand comes in the section of the budget dealing with the "out-years"—FY 2009-12. The VA's budgeteers are projecting no increases in spending for medical care during that entire four-year period. They can't possibly believe this. (Again, they note elsewhere that the caseload won't peak until the middle of this period.) They are engaging in the political game of making the future appear less grim—and the president's budget more balanced, the need for tax hikes or cuts elsewhere less compelling—than is really the case.

This is a familiar game in peacetime. But it's a damaging, deceptive game in wartime—for the soldiers who fight the war and for the citizens who are called upon to support and fund it. [emphasis added]

Think about that the next time you hear a Republican politician explaining how we must make the estate tax repeal permanent. Though they'll likely call it a "death tax" for maximum emotional impact.

Maybe we should call it the "veteran's health care defunding act" instead. Because from where I'm sitting, that $1 trillion dollars is spoken for. At least it should be.

Now tell me, honestly: who supports the troops?

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