DeLong Smackdown Watch: Mark Thoma
links for 2010-07-14

Dylan Matthew on the Congressional Deficit Turkey Vultures

Ezra Klein - Research desk compares: What's the fiscal impact of estate tax cuts vs. unemployment insurance?


What's the fiscal impact of estate tax cuts vs. unemployment insurance?: The unemployment extension proposal that Harry Reid is trying to pass has a one-time cost of $33 billion. That's for one year, and then the additional cost vs. the baseline is zero thereafter. So let's compare that temporary bump up in the deficit with four proposals (PDF) for reforming the estate tax. The first is outright repeal. The second, proposed by John McCain in the presidential election, would reduce the tax rate to 15 percent and exempt the first $5 million of an estate. The third, Jon Kyl's initial proposal, also has a $5 million exemption, with a 20 percent rate on estates up to $25 million and a second 30 percent bracket for larger estates. The fourth, Barack Obama's proposal during the presidential election, has a lower exemption of $3.5 million and a 45 percent tax rate. Here's how the total revenue effect on the deficit of those proposals compares with that of extending unemployment benefits from 2009 to 2018....

Not only do estate tax cut proposals add much, much more to the deficit in the medium-term than unemployment benefits do, they continue to grow more expensive over time, at least for as long as we have estimates. Supporting estate tax cuts but not unemployment benefits indicates something about a politician, but it's hardly proof of a deep, serious interest in cutting the deficit.