April 13, 2005

The Estate Tax Conundrum

The politics of the estate tax repeal are, as Kevin Drum points out, truly fascinating. If you ask me, liberals have already lost this battle, and the thing to do now is to learn our lessons and gear up for the big fight over preserving the income tax. That sounds defeatist, but look: Repeal proponents have been sharpening their "death tax" strategy for a decade, and popular opinion is overwhelmingly in favor of stripping back the tax, even though it affects, at most, 1 percent of the population. It's a lost battle for liberals, and the question is why it got this way. Death By a Thousand Cuts goes into this in-depth, but I'm still not finished with it yet, so I want to offer a few thoughts of my own, building off this post at MoJo.

First, polling suggests that too many voters believe they'll have to pay the estate tax when, in fact, they won't. So it seems that we just need to clear up that misperception and all will be well, right? Well, no. That approach misses the larger point—namely, that many, many Americans actually believe they're in the top 1 percent of the income distribution curve, or that they'll be there soon. (I've seen polls indicating that around 40 percent of voters believe one of those two things.) Now you can try telling Americans that they're sadly mistaken and are, in fact, less successful than they think, but that's hardly a winning political message. Indeed, the point here is that it's very hard to win the estate tax battle on facts alone—not because people get bored with statistics, although that's obviously part of it, but because people don't want to be told that they're never going to be multimillionaires, or that they're not within spitting distance of the upper classes. Delusions of grandeur work against Democrats here.

Another lesson here is that tax battles are always inherently asymmetrical. A small portion of the population cares very, very intensely about taxes—because they're the ones paying the bulk of them—while the rest of us are sort of apathetic. There's just not a large constituency demanding, willy-nilly, that we soak the rich. There is, however, one exception: during those times when it looks like the government is going to have severe funding issues, then calls to soak the rich have a certain resonance. That explains the overwhelming support for lifting the $90,000 cap on wages subject to the payroll tax—something concrete is at stake. Additionally, it seems that from a political standpoint, arguments about the effect of taxes on the economy just don't get much mileage. Nor do arguments that estate tax repeal will cost $1 trillion per decade.

So that leaves the moral arguments. Indeed, there are various moral cases in favor of keeping the estate tax, but they haven't been very well-honed over the years. Certainly not as well-honed as the moral arguments against the tax ("it's unfair to tax dead people!," "it forces people who built up the family business with their cracked, raw, bleeding hands to dismantle everything upon death!," etc).

As a way out of the morass, I think the "Paris Hilton" argument works pretty well here: Namely, that the estate tax prevents the emergence of a small and self-perpetuating class of lavishly wealthy heirs and heiresses who do nothing to earn their money and end up living lives of excess and decadence. Perhaps this could be tied into a grander narrative about how wealth and success should be earned, not inherited. (Though I can see problems with this sort of message.) But liberals have never pushed this case as well as they could have, and it only pops up erratically, when estate tax issues make the headlines. Certainly there's never a constant drum of this message day-in, day-out, as repeal proponents have done on the other side.
-- Brad Plumer 4:54 PM || ||