Progress is Taking Someone Else's Money

Tax Breaks for Rich Murderers is David Runciman's review of Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth by Michael Graetz and Ian Shapiro

[T]he politics of another country’s tax system is unlikely to be of much interest to anyone with any sort of normal life... Don’t let that put you off. This is one of the most interesting books about politics, and power, and the way the world is going, that you are ever likely to read.

...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. [I]t was a tax that so obviously took from the relatively few to relieve the burden on the very many....

I'm in no danger of being personally affected by the estate tax, but I just don't get why it's assumed that it's absolutely OK to take money away from the rich. In fact Runciman does seem to get it:

As Graetz and Shapiro point out, the politics of taxation in the United States has traditionally relied on a relatively straightforward choice. Policies that allow individuals to hold onto their money and do with it what they like may be economically efficient, but they are not particularly fair: many people will end up with less than they need and perhaps than they deserve. Progressive taxes, which are more equitable, are nevertheless not so efficient at generating future wealth...

So he's unapologetically opposed to economic efficiency and the generation of future wealth, and there's one minority it's OK to mistreat; he cites Grover Norquist

[i]n an exchange on National Public Radio, the transcript of which is included in this book and is practically worth the price of admission on its own, Norquist went a stage further:

I think it speaks very much to the health of the nation that 70-plus per cent of Americans want to abolish the death tax, because they see it as fundamentally unjust. The argument that some who play the politics of hate and envy and class division will say, ‘Yes, well, that’s only 2 per cent,’ or, as people get richer, 5 per cent in the near future of Americans likely to have to pay that tax. I mean, that’s the morality of the Holocaust. ‘Well, it’s only a small percentage,’ you know. ‘I mean, it’s not you, it’s somebody else.’

After a bit more of this, Norquist’s interviewer, Terry Gross, feels compelled to intervene: ‘Excuse me. Excuse me one second. Did you just . . . compare the estate tax with the Holocaust?’ Norquist starts to backtrack, but he doesn’t get very far:

No, the morality that says it’s OK to do something to a group because they’re a small percentage of the population is the morality that says the Holocaust is OK because they didn’t target everybody, just a small percentage . . . And arguing that it’s OK to loot some group . . . or kill some group because it’s them and because it’s a small number, that has no place in a democratic society that treats people equally . . . When South Africa divided people by race, that was wrong. When East Germany divided them by income and class, that was wrong. East Germany was not an improvement over South Africa.

You might expect this to have been the point at which the repeal movement started to fall apart, given that the pro-repeal lobbyists were trying to recruit support from all areas of American society, not just the lunatic fringe...

Note that it's lunacy to criticize class warfare.

...Once the estate tax had been depicted as a form of 'discrimination', and voters reminded that successful gay and lesbian couples were already discriminated against by not being free to take advantage of marital tax deductions, polls discovered that 82 per cent of gays and lesbians were in favour of estate tax repeal, even though the vast majority were also supporters of Al Gore.

The only way this strategy could work, of course, was for the estate tax to be viewed in complete isolation from any wider questions of social solidarity between the wealthy few and the disadvantaged many, within and across various minorities.

"Social solidarity between the wealthy few and the disadvantaged many" means taking away from the former to give to the latter. That's not so much solidarity as making everyone the same in terms of income.

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...as possible poster-children for the absurd injustice of inherited wealth...

It would be better, surely, to adopt a strategy that Graetz and Shapiro rule out as much too extreme, which is to find some examples of well-known criminals who came into a stack of money, like Michael Skakel (the Kennedy cousin who was convicted of murdering Martha Moxley), and run with the slogan: 'Bush favours tax breaks for rich murderers.'...

And here I thought the class warfare types had all the best stories.

Anyway, according to Brian Doherty's Death and Taxes, a fairly ancient article,

The tax hits mostly family-owned businesses, 87 percent of which don't survive to a third generation. (Nearly 90 percent of estate taxes are paid on estates worth less than $2.5 million.) The Small Business Survival Committee estimates that 90 percent of family businesses that fail right after the founder dies do so because the business doesn't have enough liquid cash to pay the estate taxes. In a 1993 study, Richard Wagner, chairman of George Mason University's economics department, estimated that estate taxes have cost 262,000 jobs since 1971.

Which means that even the feds aren't getting their money's worth from estate taxes -- which amount to less than 1 percent of the budget, generally less than $15 billion a year. With the income taxes lost due to stifled job creation and money spent on estate planning, plus enforcement and compliance costs that can be higher than 50 cents on the dollar, even that small federal benefit might be an exaggeration.