More proof that Congress, no matter what party its members belong to, does not represent regular people: its failure to reinstate the estate tax.

More loot for richest as everyone else scrambles for the inadequate crumbs.

From US News & World Report:

The tax, a levy on the wealthiest Americans, expired on the first of the year because Democrats were unable to find support for even a temporary continuation of the tax while they debated a longer-term solution. Despite assurances from Senate Majority Leader Harry Reid that the body will approve a retroactive fix when it returns to work next month, Senate Finance Chairman Max Baucus called it “embarrassing” that the Democratic-controlled Congress could allow the tax to lapse.

Embarrassing? More like craven. This is a Congress that is spending billions to stave off a depression. That is the right thing to do, but guess what? That money has to come from somewhere and throwing away the revenue that comes from the estate tax is just plain stupid, if not worse.

The estate tax, just a week ago, exempted the first $3.5 million of a person’s estate (or $7 million for a couple) from the tax. Then a 45% rate kicked in, bringing in about 20 cents for every dollar of the estate’s worth. In 2008, that amounted to about $26.5 billion.

The tax is scheduled to return next year at a higher rate with a smaller exemption, but 1) that $26 billion or so Congress kicked away is gone, gone, gone and 2) who knows what Congress will do to the tax before 2011?

Meanwhile, according to the Center on Budget and Policy Priorities, Congress’ dereliction of duty is leaving those who inherit lesser estates at risk of higher taxes and vastly more complex tax returns. That’s because those that inherit will have to pay capital gains on the value of assets from the time the decedents acquired them. Under the previous rules, the taxes are due only on the gains that accrue from the time the assets are inherited until the beneficiary disposes of them. The law exempts the first $1.3 million in unrealized capital gains (and an additional $3 million if the beneficiary is the surviving spouse) from eventual taxation. But, according to CBPP:

Many more people, and many more family-owned businesses and farms, would face new taxes as a result of the change in the capital-gains treatment of inherited assets that would accompany the disappearance of the estate tax than would benefit from the end of the estate tax itself.

• Few people — and even fewer small farms and businesses — will benefit at all from the disappearance of the estate tax in 2010. Tax Policy Center data show that the estates of only one-quarter of 1 percent of people who die — 5,490 estates nationwide — would owe any estate tax if the 2009 estate-tax rules were continued, and thus would benefit from the tax’s demise.Tax Policy Center data also indicate that only 100 small businesses and farm estates in the entire country would owe any estate tax in 2010 if the 2009 estate-tax rules were maintained.

• In contrast, the heirs of approximately 71,400 estates could face new capital gains taxes if the estate tax is allowed to disappear for 2010, according to an analysis by John Buckley, chief tax counsel for the House Ways and Means Committee. Moreover, at least 62,500 of these are estates that would not owe any estate tax if the 2009 rules were continued and that thus would be adversely affected by estate tax repeal. Farm and business estates would constitute a disproportionately large share of this group.

Not only would many estates face higher taxes, but nearly all large estates would face new administrative burdens, since their owners would have to know (or estimate) the original purchase price of every asset in the estate in order to calculate their capital gains tax liability. Under current law, in contrast, all assets in an estate are simply assessed for their value at the time of the decedent’s death.

This isn’t quite as ugly as health care reform that doesn’t really reform, but it is another sign that the wrong interests hold the power in those money-lined, off–limits-to-most corridors of power.