« This Should Be in the Onion, or Fafblog... | Main | "Asset Returns and Economic Growth": The Econ 1 Version »

April 15, 2005

David Wessel Writes About the Estate Tax

He strongly, strongly recommends Michael Graetz and Ian Shapiro's Death by a Thousand Cuts:

WSJ.com - Capital: "When we last left the estate tax -- or, if you prefer, the death tax -- Congress had slaughtered it. Well, not exactly. President Bush signed a bill that reduces the estate tax gradually until it vanishes altogether in 2010. But the tax will be resurrected in its pre-Bush glory in 2011 unless Congress acts before then....

Before another round in this debate begins, pause to consider the facts -- and the unusual politics that have made a populist issue out of repealing a tax that hits only the best-off Americans... fall[s] on those who leave assets of more than $1.5 million. That is about 18,800 of the 2.5 million people expected to die this year.... The tax will bring in about $18 billion this year, enough to fund the National Aeronautics and Space Administration, with a few billion dollars left over.

All this has Michael Graetz, a Yale Law School professor and the top Treasury tax official in the first Bush administration, wondering: 'How could a tax that applies only to the richest 2% of the American public become anathema to 70% of the population and be repealed by bipartisan votes in both the House and the Senate?' In a new book, 'Death by a Thousand Cuts,' that tries to unravel the mystery, Mr. Graetz and Yale political scientist Ian Shapiro show how defenders of the tax underestimated the tenacity and shrewdness of the other side and mistakenly thought reciting facts would keep public opinion on their side.

Advocates of repeal steered the issue away from facts to morality, declaring the estate tax an unfair levy on success. They also put faces on it -- U.S. farmers and small-business owners, never rich fellows who wanted to bequeath mansions or portfolios. One of the most prominent belonged to Chester Thigpen, a tree farmer from Mississippi, who testified in favor of repeal at age 83 in 1995. 'It turns out,' Mr. Graetz reports, 'that Thigpen's estate was too small to be affected by the estate tax, but that was just a detail.'... With hindsight, Mr. Graetz says estate-tax defenders (of whom he is one) should have focused on the children who were lucky to be born to wealthy people. 'We could have called it the Paris Hilton Benefit Act,' he says....

The ability of estate-tax foes to hold onto the 'fairness' argument is a remarkable milestone. The modern estate tax dates to Teddy Roosevelt, who famously declared that the 'man of great wealth owes a particular obligation to the state because he derives special advantage from the mere existence of government.'...

As both sides realize, the stakes in this year's estate-tax debate are larger than the small number of people it hits. It is part of a debate about how much to use the tax code to arrest the widening gap between rich and poor.

I think David mistypes. On the Republican side, repealing the estate tax is part of a project to use the tax code to increase the widening gap between rich and poor.

Meanwhile, from Oliver Willis:

Posted by DeLong at April 15, 2005 08:41 PM