Next week as Congress returns, House Republicans will address what they consider one of the nation’s most pressing problems: relieving the tax burden on the wealthiest 0.2 percent – two of 1,000, the multimillionaires – by eliminating the estate tax. Its repeal will cost $269 billion over 10 years, but Republicans find the cause so compelling that they would add that total to our deficits rather than struggle with “paying” for it. (For details, see the clear summary by Americans for Tax Fairness)
The bill, of course, has no chance of becoming law. If necessary, the president will veto it. It is a message bill. Conservatives love to rail against what they have been taught to call the death tax. Republicans want their voters – or more importantly their billionaire donors – to know that, even with inequality at record extremes, with the wealthiest 0.1 percent of families possessing as much wealth as 90 percent of American families, they are on the case, staunchly standing strong to defend the inheritances of the sons and daughters of the privileged few.
Of course, they don’t actually put it that way. There is much hokum about small business owners and family farmers. But these fig leafs have long ago been exposed as fraudulent. No one has ever been able to point to a family farm sacrificed to the estate tax (although, hopefully, the country estates of Wall Street lawyers who keep a few cows for tax write-offs and decoration don’t escape).
In fact, the estate tax doesn’t touch anyone but the very wealthiest American families. As John Oliver noted, if you aren’t comfortable calling all the sh*# you’ve accumulated an estate, stop fretting. The estate tax now is levied on fortunes over $10.9 million for a couple or $5.4 million for an individual. It’s a graduated tax, with the average effective rate of 16%. Families this wealthy hire accountants to help them shelter much of their fortunes. And since more than half of the money in estates over $100 million consists of capital gains that have never been taxed at all, it’s only sensible that the wealthy pay something before the fortunes are distributed.
When did conservatives become committed to protecting dynastic fortunes? No free market principle favors lavishing millions on the heirs – idle or otherwise – of the wealthy. If there was one thing the Republic’s founders agreed on, it was the dangers of inherited wealth to democracy. Jefferson invoked Adam Smith, the patron saint of conservatives, who wrote:
“A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural.” Smith said: “There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death.”
Republican Teddy Roosevelt stumped for a “graduated inheritance tax increasing rapidly with the size of the estate.”
Democracy does not fare well with extreme inequality and a dynastic plutocracy. As the great Supreme Court justice Louis Brandeis famously warned: “We can either have democracy in this country or we can have wealth concentrated in the hands of a few, but we can’t have both.”
The same Republican Congress that will vote this tax break for multimillionaire dynasties just passed a budget that calls for slashing $5 trillion over 10 years in investments in education, Pell grants, environmental protection, Medicaid and Medicare, food stamps and other programs for the most vulnerable. They think it more important to lard the estates of the few than to invest in areas vital to our future.
For example, the $269 billion tax break for the very wealthy would pay for the entire shortfall in the highway and mass transit trust funds plus the entirety of the Obama’s plan to provide free community college for 9 million students.
Conservatives will vote to eliminate this tax on the estates of the very wealthy after deciding to allow parts of the Earned Income Tax Credit and the Child Tax Credit to expire, causing more than 13 million lower-wage working families – including 25 million children – to lose an average of $1,073 a year. Family values? Turns out it is only a certain class of families that they value.
It’s easy to mock this, but it isn’t funny. America suffers the most extreme inequality of any advanced industrialized country. One family – the Waltons – possesses as much wealth as 40 percent of all Americans. The International Monetary Fund, hardly a radical bastion, reports that extreme inequality destabilizes economies. As a result of extreme inequality, the U.S. – the land of opportunity – has less economic mobility than most other industrial nations. Worse, extreme inequality cripples societies, leaving people scarred from worse health, shorter life expectancy, greater poverty, more chronic illness, and more violence. America is no exception.
The Gilded Age inequality that we suffer isn’t inevitable. It reflects a set of policy choices that have rigged the rules to favor the very few. The top 1 percent have captured 95 percent of the nation’s income growth coming out of the Great Recession. That doesn’t happen unless the deck is stacked.
And of course, with conservatives on the Supreme Court overturning limits on money in politics, big money increasingly corrupts our democracy, and insures that the rules stay rigged.
What any sensible Congress should be doing – and what any sensible elite would be demanding – is making the tax code more, not less progressive. Estate taxes should be higher; the various loopholes and dodges to escape them should be eliminated. The wealthy should be encouraged to donate their fortunes to the charities of their choice, and limited in buying and selling candidates of their choice. Dynastic wealth is simply incompatible with a democracy.
President Obama has described inequality as the “defining issue of our time.” Jeb Bush echoes that the “opportunity gap is the defining issue of our time.” Even Ted Cruz and Marco Rubio decry how unequal Americans have become.
But Republicans in the House – the most conservative caucus since the 1920s – clearly disagree. They believe that a pressing issue of our time is that the very wealthiest of Americans, not the top 1 percent but the top 0.2 percent – are oppressed by modest taxes on their estates. And they are acting to put a stop to that. This is not only not risible, it is outright indecent.