Death Tax Repeal Expected Today
The U.S. House of Representatives is today expected to “permanently” repeal what the Republicans have cleverly dubbed the “Death Tax,” the high tax paid on the estates of those who die with a significant amount of assets.
Jonathan Weisman has a piece on the front of WaPo’s business section explaining the political brilliance at work here: “Erosion of Estate Tax Is a Lesson in Politics – A Break for the Well-to-Do Becomes an Everyman Issue.”
Last month, Graetz and Yale political scientist Ian Shapiro published “Death By A Thousand Cuts,” chronicling the estate tax repeal movement as “a mystery about politics and persuasion.” “For almost a century, the estate tax affected only the richest 1 or 2 percent of citizens, encouraged charity, and placed no burden on the vast majority of Americans,” they wrote. “A law that constituted the blandest kind of common sense for most of the twentieth century was transformed, in the space of little more than a decade, into the supposed enemy of hardworking citizens all over this country.”
The secret of the repeal movement’s success has been its appeal to principle over economics. While repeal opponents bellowed that only the richest of the rich would ever pay the estate tax, proponents appealed to Americans’ sense of fairness, that individuals have the natural right to pass on their wealth to their children.
By 1994, Newt Gingrich’s Republican insurgents had latched onto the estate tax issue, but the Contract With America called for an estate tax reduction, not repeal. In 1995, Luntz poll-tested the term “death tax” and advised the new GOP majority to never use the terms “inheritance” or “estate tax” again.
This is indeed interesting, as most matters of politics come down to practicality rather than ideology. In this case, though, the Republicans managed to persuade ordinary voters–most of whom would never pay the tax–that there was something just not right about people’s money being taxed again when they died. The fact that the tax also affected those who died with small businesses and family farms helped obliterate the class issue, too.
Kevin Drum dubs this “Republican Trust Fund Baby Act of 2005” but allows that,
I actually understand the gut appeal of estate tax repeal. After all, when you die don’t you want to decide who gets your money? And yet, Democrats’ inability to make the counterargument stick is telling. The only thing being taxed is estates of robber baron size; the only people being taxed are the pampered children of the robber barons; and the cost of repeal is on the order of $1 trillion per decade. Apply that to Social Security and the system would still be solvent when Captain Kirk retired.
Technically, though, this isn’t true. The estate tax is “paid” by the person doing the dying rather than by those doing the inheriting, although it amounts to the same thing. And, certainly, the top 2.5% of the country is not the “robber baron” class.
From Weisman’s piece:
President Bush’s 10-year, $1.35 trillion tax cut in 2001 began a decade-long phase-out of the estate tax. The portion of an estate exempted from taxation was raised from $675,000 in 2001 to $1.5 million in 2004. Next year, the exemption will rise to $2 million for individuals and $4 million for couples.
Those numbers once sounded staggering to me but no longer. In the D.C. area, a modest house costs around $1 million. In Kevin’s neck of the woods, much more than that. It would not be at all unusual for a modestly successful attorney, heart surgeon, or small entrepeneur to leave an estate worth $2 million. Indeed, I’d guess some of the founders of Washington Monthly would meet those thresholds.
I don’t deny that there’s something unfair about the likes of Paris Hilton or the Kennedy kids being set for life simply by being born. To the extent that we want our society to be based on “merit,” inherited wealth creates disparities. If the solution is governmental confiscation, though, I want no part of it.
For that matter, if social engineering is our goal, why not simply tax the estates of all decedents one hundred percent? Then, no one would have unearned income.