No relief

Repeal of the estate tax will help only the rich, but will cost us all.

Steve Bodow
July 25, 2000 11:00PM (UTC)

Hey, revisionist history buffs, guess what?! Pre-abolition America -- where the rich were rich and the poor were chattel -- was an Eden of social equality. When the 106th Congress voted to abolish the federal estate tax last week, they returned us to that ancient paradise.

That's just one of the howlers right-wing think tanks have devised in their shockingly successful attempt to sell the country on a tax cut that benefits the wealthiest 2 percent of the population.


Granted, some tax relief is in order. The federal budget surplus keeps climbing and the economy seems to be cooling: the perfect time for a cut. The just-passed end to the so-called "marriage penalty," for example, is a decent proposal that (though slanted to favor wealthier couples and destined for a veto) would give a break to a broad cross section of people.

But after a decade of unprecedented economic gains for the nation's wealthiest, you'd think a gift-wrapped $850 billion (the Treasury Department's estimate of what the repeal would cost over the next two decades) targeted mainly at millionaires would be election-year poison. After all, people only pay estate tax on property worth more than $675,000; family-owned businesses are exempt from paying the taxman a dime until they're worth over $1.3 million. In 1997, the last year for which the IRS provides figures, only a few thousand families had to pay any estate tax at all. It seems only President Clinton, who has vowed to veto the bill, understands the identity of the true beneficiaries.

An extraordinary 60 percent of Gallup-polled citizens support the measure. "There have been stories on network news that just didn't make sense," laments Michael Ettlinger, the director of tax policy at the relatively liberal Citizens for Tax Justice. "They found people being impoverished by the estate tax, which just can't happen." But, he contends, almost no one saw through that because, ironically, "most of the country has no experience with paying the tax." Bruce Bartlett, senior fellow at the National Center for Policy Analysis, offers a different explanation. "As the nation's wealth rises, more and more of those clearly in the middle class are affected by the estate tax," he recently wrote, before adding, "or at least believe that they might be."


Where do middle-class voters get their misinformation? Perhaps from the same folks who really do have something to gain. But much of the right's propaganda has been far-fetched at best. Perhaps most gallingly, Bartlett demands not just that we tolerate the rich, but we feel grateful for them. "The rich perform a public service. Since it's not much fun to be rich if even the riffraff can enjoy the same products, the rich aid innovation by pushing the limit of what is possible." His main example: appliances. The estate tax has to go because it prevents the privileged citizenry from buying next-generation microwaves, which we riffraff may someday be able to appreciate.

As though our seeming lack of adequately glorious kitchen equipment weren't enough to convince us of the tax's injustice, Bartlett adds that it is also anti-women. Why are women the levy's "chief victims?" Because wives usually survive their husbands, and one pays no estate tax on money inherited from a spouse. The family's estate tax doesn't come due until she passes on. First she dies; then she is victimized. Twisting words, Bartlett attempts to portray his fellow repealers in, of all things, a progressive feminist light.

The Heritage Foundation, the arch-conservative think tank, summarizes the issues in a similar way, focusing first on another of the estate tax's great victims: minority businesspeople who supposedly "suffer anxious moments wondering whether the savings they have built ... will be destroyed."


Appealing to core liberal constituencies is a crafty rhetorical move ... and awfully cynical. The fact remains that the overwhelming majority of estate taxes are coughed up by richly endowed Caucasians. That's not to say the Beltway-based foundation has forgotten the rich, who it says invest fewer of their ducats in productive enterprises because, thanks to the estate tax, the government grabs more than half of whatever they don't spend in their time on this earthly plane. And this -- not, say, simple lust for material goods -- is what forces them to "buy vacations in Vail and fine art in Lisbon."

But according to Heritage's own numbers the tax doesn't take more than half the assets of any estate that has less than $5 million in taxable dollars. We're not talking about a lot of people here. And furthermore: Lisbon? Heritage also states that killing the death tax would not, as one might expect, increase the budget deficit. Why? Because there would (they assume) also be matching cuts in social spending. A nice 'n' tidy fix. And also stark proof that poorer families would, under this right-wing plan, suffer directly in order to pay for richer folks' increased fortunes.


And even further to the right, the libertarian Cato Institute claims that the estate tax encourages a spendthrift, "die-broke" mentality -- a problem 98 percent of the country can only dream of having. CATO conveniently ignores that no one starts paying until they have $675,000 in assets. To someone with tens of millions in stocks, bonds and real estate, $675k may sound like "broke." But to most Americans, broke is a lot closer to zero. Yes, most of us are getting richer as the years pass. But the exemption is rising, too. By 2006 you won't have to pay estate tax unless you are, literally, a millionaire.

There are many ways of making the estate tax fairer and less threatening to whatever portion of the upper-middle class might be lucky enough to ever have to deal with it. And the tax should be simpler, with fewer loopholes and rates that make collecting it unduly complicated and expensive. Congressional Democrats have already made a few proposals, such as greatly raising the exemption level for family-owned businesses.

But ideologues on the other side rejected such notions without a thought. (To his credit, Bartlett has criticized the Republican leadership for not compromising.) The GOP Congress insists on getting rid of the tax wholesale: a lopsided sop for the wealthy at the one time in American history when they need it least. If the estate tax is repealed, will they buy fewer Colorado condos and Portuguese paintings? No -- they'll buy more. And the rest of us will foot the bill.


That's why repeal really is about opportunity -- an opportunity for the Democrats to aggressively expose their rivals' abject fealty to money. People want a tax cut, but not one that disproportionately jeopardizes most Americans' financial future for the continued enrichment of the gilded minority. If the Democrats get their act together, they could make a strong case that an overzealous GOP has shown us their true motivations -- and send them running for cover.

Steve Bodow

Steve Bodow is a writer in New York who has contributed to New York magazine, Wired and Feed.

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