The Very Rich vs. The Merely Rich

Recently I discussed the dubious logic used by conservatives to justify income tax cuts for the wealthy. As I pointed out, it's not at all clear, either logically or empirically, that cutting taxes does anything to effect productivity (or that if it does affect productivity, it affects it in the way conservatives claim it does). Yet when it comes to the GOP proposal to abolish (or drastically scale back) the estate tax, even these specious arguments have to be thrown out the window. Why? Because the estate tax is only assessed after you die. It's one thing to claim that a tax break that affects your weekly paycheck will alter your productivity. It's quite another to claim that your productivity will be affected by a tax that may or may not be applicable to your estate after you've departed this world. And keep in mind, the tax only applies to estates larger than $1.5 million (soon to be $3.5 million!). Of the 2.4 million people who died in 2003, only 28,600, or 1.2% owed any tax at all. Indeed, if anyone's productivity will be affected by the elimination of the estate tax, it will be those who inherit these massive estates, who will now have even less incentive to be productive members of society.

If you think about it, there is no tax that is more American than the estate tax. America is supposed to be the land of social mobility, where everyone works hard and anyone can make it to the top. We're not supposed to be the land of old money, where massive family fortunes support generation after generation of worthless aristocrats. The estate tax is perhaps the fairest, most progressive tax we have. It applies only to the heirs of massive fortunes. Without the estate tax, our society will become increasingly stratified as wealthy families control a larger and larger percentage of the country's wealth. How is it in our interest as a nation for Paris Hilton to receive her entire inherited fortune tax free? If anything, the estate tax should be increased, significantly.

So how is it that a repeal of the estate tax is even being considered? As the Washington Post explains:

"The estate tax repeal movement began in the late 1980s
when Patricia Soldano, an estate planner in Southern
California, teamed with Blethen to lobby Congress. Soldano
was bankrolled by a handful of families with vast holdings,
including the Mars family of McLean, who made millions
from candy; Mrs. R.B. Davenport III of the Krystal
hamburger fortune; and Dorrance H. "Dodo" Hamilton,
a Campbell soup heiress."

In short, the repeal of the estate tax is nothing more than a gift to a very wealthy and influential special interest lobby. There is no serious policy rationale behind it. Sadly, however, very few in Washington (Democrats included) have made any real effort to protect the interests of average Americans in this matter. As the Post article explains:

"The very rich and the merely rich are fighting over
the fate of the estate tax. So far, the very rich are
winning. Small-business owners -- the merely rich -- want to
exempt from taxation inheritances of up to $10 million.
The very rich -- people whose estates are worth tens of
millions or even billions of dollars -- want instead to reduce
the tax rate on assets passed on at death. A $10 million
exemption isn't nearly enough for them."

So that's it. That's what passes for responsible policy debate is this country today: the rich and the ultra rich haggling over how big a tax break to give themselves. And all this is happening at a time of record deficits, in the middle of a costly and increasingly intractable war, and with critical government programs like Medicare and Medicaid facing massive projected shortfalls. Where's the outrage?