Arkansas Sen. Mark Pryor is well on his way to establishing himself as the eminent fiscally conservative Southern Democrat, a role left vacant by the retirement of Sen. John Breaux two years ago. Sen. Pryor has been shifting on key economic issues, and the clearest indication of this change was his vote on the recent tax reconciliation legislation, which postponed for two years scheduled tax hikes on investors and middle-class families.
In the economic growth section of his Senate website Sen. Pryor states: “I support the permanent repeal of an estate tax that harms small businesses and family farms.” We’ll learn a lot more about how serious Pryor’s fiscal conservatism is when he has an opportunity to make good on this promise late this week.
The way the parties have aligned themselves in Washington these days, the Republican majority supports lower taxes but all too often supports higher spending. Democrats are splintered on spending questions but largely united in favor of higher taxes. In this environment there is a vital need for a re-emergence of true limited-government principles, supporting smaller government both on the spending side and the tax side.
Sen. Pryor has always had a fairly strong record on spending issues. He voted to reinstate pay-as-you-go rules that would require Congress to offset new spending programs with cuts elsewhere. He opposed bloated budgets.
Pryor’s record on the tax side is improving and his recent vote on tax reconciliation was a big pro-growth step. The 2003 tax bill, which reduced the tax rate on investment income, was a stunning success, sharply ending a nine quarters decline in business investment and igniting a three year boom. The economy has grown at a brisk 4% rate, creating more than 5 million jobs and the largest labor force in American history. Unemployment fell from 6.2% to 4.7%. With this rising economic tide came higher federal tax revenues.
Such a compelling success story should have been enough to convince all of the members of the U.S. Senate to vote to postpone tax hikes that would undo all of this economic progress. Yet only three senators that voted against the 2003 bill changed their votes this year in light of this overwhelming evidence. Those three: John McCain, Bill Nelson, and Mark Pryor.
Now comes a major test for Sen. Pryor. This week the Senate will vote on ending the federal estate tax. Several procedural votes are expected that will require 60 votes to succeed, so every vote is critical. In the past, Pryor has voted to keep the estate tax, but there are strong indications that, putting fairness and economic growth over partisanship, he has changed his position.
The estate tax is economically and fiscally destructive. It destroys as many as 250,000 jobs every year. It diverts about $20 billion dollars annually from running businesses to paying for expensive life insurance policies and estate planning while outright destroying family farms and businesses that lack the cash flow or sophistication for such planning. The tax raises only about 1% of federal revenue, and many credible estimates, including most recently one from the Congressional Joint Economic Committee, show that repealing the tax would pay for itself through dynamic growth effects and increased capital gains revenues.
If Mark Pryor is serious about defining himself as a true fiscal conservative he will stay true to his pledge, on all votes, procedural and substantive, and end the estate tax.