That the estate tax is even being debated calls out the fantastic narrative abilities of the right and the widespread naivety of the American public

While I am glad that (mostly) Democrats stood up to challenge and stopped the latest affront to the nation’s poor, it is still incredible to me that so many people think our current estate tax laws are a bad thing. The best explanation for the recent success of the right-wing in the American political landscape is their ability to craft a narrative that resonates with the American people on a level that transcends issues and economics (not to mention good sense). Books like George Lakoff’s Don’t Think of An Elephant are a like a beacon, exposing this truth and like a manual for how others may craft their own stories, helping them to identify with the masses.
Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth by Michael J. Graetz, Ian Shapiro seems to be another such book.
Though it is in the guise of a discussion of tax law and policy, Death by a Thousand Cuts is actually a story of how an ambitious few, crafted a message that has been slowly winning people over to the wrong side of the estate tax debate. A side nearly none of the people belong on.
In his review of Death by a Thousand Cuts Davis Runciman points out several astute observations and captures the essence of the book:

The estate tax was the most progressive part of the American tax system, because it rested on the principle that the wealthy few, if they were not willing to bequeath their money to charity, should not be permitted to pass it all directly to their heirs. It had been on the statute book for nearly a hundred years, and throughout that time it had been generally assumed that there was widespread support for the idea that unearned wealth passed between the generations, creating pockets of aristocratic privilege, was not part of the American dream. Because it was a tax that so obviously took from the relatively few to relieve the burden on the very many, there seemed no possibility that a sufficiently large or durable coalition of interests could ever be formed to get rid of it. Yet during the 1990s just such a coalition came into being, and not only did it hold together, it grew to the point where the clamour for estate tax repeal seemed irresistible.

This is getting a bit long so you can…


I am sprinkling other facts in amongst the quotes from the London Review of Books, this one from the Coalition for Americas Priorities:
For 98% of Americans, the estate tax takes away nothing. For the other 2%, the average effective tax rate is 19%. Zero estate tax is charged on assets left to a spouse or to charity.
Now more from Runciman, simply because he is a much better writer than I. Here he talks about the inability in recent years (think FDR had such issues?) for the Democrats to express a powerful narrative that the American public can get behind.

Part of the problem for the Democratic Party was that their enemies seemed to have all the best stories when it came to the estate tax: all those tales of hard-working families striving to make their way in the world, until the grim reaper conspires with the taxman to scatter their modest fortunes to the winds. But were there really no stories to throw back? Graetz and Shapiro suggest that a similar campaign could have been run by the opponents of repeal, highlighting a few of the many instances of wholly worthless individuals inheriting a large chunk of unearned wealth on no basis other than an accident of birth. It has to be said, however, that the way Graetz and Shapiro lay out this option is indicative more of the problems liberals have with confronting the dark arts of their opponents than it is of any likely solutions. They identify Paris Hilton and Nicole Richie, stars of The Simple Life (a TV show which sent the super-privileged pair out to encounter ordinary Americans and observe the hilarious results) as possible poster-children for the absurd injustice of inherited wealth, citing the New York Times verdict on the two as ‘ditsy’, ‘ignorant’ and ‘pampered’.

It really is sad when the best story the authors can seem to come up with is don’t give more money to rich bitches. Why not a simple Robinhood theme? Why should the uber-rich get to pass on wealth to those who didn’t work hard for it? Is the Republican message, pull yourself up by the bootstraps? I didn’t think they were talking about lacing up some Uggs. The big idea with many supporters of repealing the estate tax is that they feel somehow that it is an unfair tax. Taxing people who made money just because they die doesn’t seem right, even un-American. But the Coalition for Americas Priorities asks:

Unfair compared to what? The estate tax is eminently fair. It is collected from those most able to pay, and it encourages the recycling of wealth through the non-profit sector. It limits the size of family dynasties that would otherwise distort our democracy and shrink economic opportunity for succeeding generations.

In that commentary lies the idea that repealing the estate tax would actually weak our democracy and, I don’t think that is overstating things. Right now the United States is now the most unequal society in the industrialized world. [Levy Economics Institute] We are already run by a small group of wealthy, interconnected individuals, do we want to have our future run by their ingrate offspring?
Runciman continues on with a commentary on how narrative had grown to play such an important role in politics and how the deck seems to be stacked for the politics of ignorance, aka the politics of the right:

Instead, this is a tale about the power of narrative in politics, and the increasing ease with which individual stories can be made the be-all and end-all of political debate. The new information technology, with its cascades of rumour and limitless outlets for personal histories, is more often than not the enemy of informed public discussion. In the face of an endless readiness on all sides to heed the unmediated voice of personal experience, it has become harder to sustain the bigger picture needed for any plausible defence of progressive politics. This shifts politics, inexorably, to the right.

Facts:
Full repeal of the estate tax would cost more than $600 billion over 10 years, according to the Congressional Joint Committee on Taxation
The United States is now the most unequal society in the industrialized world.
Resources:
Recent Trends in Wealth Ownership, 1983-1998 – The Levy Economics Institute
Household Wealth and the Measurement of Economic Well-Being in the United States (May 2006) – The Levy Economics Institute
Coalition for Americas Priorities
Estate Tax Showdown Is Splitting the GOP (NY Times)
FactCheck.org weighs in on ads on both sides
They Rule – a visual look at who has power

Advertisements

4 responses to this post.

  1. I dunno, I understand what you’re saying, but having personally witnessed the bad side of the estate tax, I’m not sure how I feel about the issue.
    Someone I know (you can probably guess who, but I’ll keep it private) had their grandfather pass away recently. He left the family with a couple million dollars worth of land and other assets that weren’t liquid. His heirs are not rich, they’re mostly farmers. The problem comes when you’re asked to pay several hundred thousand dollars in taxes on money nobody has (or will have) for quite some time. What do you do then?
    I don’t think the issue for them was how much money they were bound to recieve, it was how much they were expected to pay in taxes and exactly how to afford it. It’s a really crappy situation to be in.
    If they could find a way to have some relief for people like this (say, payments over time, or allow a deferal until sale of assets to pay the tax), I think it would be fine, but there certainly are problems for people in this position.

  2. Brent, this seems like its an issue of procedure rather than policy. In fact , I researched it a bit and this is what I found:
    “To limit estate tax liability, farmers can currently value farmland at between 45% and 75% of its fair market price. Farmers can also pay back estate taxes over 14 years.
    Simplifying these rules would provide relief for modest estates and reduce the need for planning and legal manuever-ing, while making sure that the wealthiest estates still pay their fair share.” – http://coalition4americaspriorities.com/etfs_4.htm
    There is also an exemption for estates valued at $2 million in 2006 that grows to $3.5 by 2009. Of course that doesn’t help your friend.
    Bottom line Brent is that this tax really only affects the wealthiest 2% of the population if they attempt to give large sums of money to heirs. It is the most progrssive of taxes and should stay in place to keep things fair.

  3. This is a really small comment box! In Buffalo, a small-market football town, we have a team owned by a 87-year old guy. He bought the team for $25,000 40 years ago, and it’s valued at 600 million now. His heirs can’t possibly afford to pay the death tax on this, so the team will go up for sale when he dies, and nobody from western new york will be able to buy it. Then it will move out of the city to a larger-market town. The rich will get richer, and Buffalo will get poorer.
    It’s not an everyday event, but it’s a real-life example of the way Buffalo will probably lose its football team and a huge part of its identity.
    I guess I see the issue as less whether the kids deserve to inherit money they didn’t earn, and more about whether the parents should have to pay tax on money that’s already been taxed.

  4. Eric,
    As much as I feel for the fans in Buffalo, this case only effects at most, 40 families in the US (if you count all sports franchises owned by families). I would not be fair to the American people to repeal a tax for them.
    Also, its a fallacy that most of the money taxed with the estate tax is double taxation. The fact is, much of what is taxed in an estate has not been previously taxed – large estates, which consist of unrealized capital gains, would never have been taxed were it not for the estate tax.
    (yeah the box size will be remedied soon, thanks)

Comments are closed.

%d bloggers like this: