A Test of Principle
Amazingly Enough, The DLC Makes Sense On Estate Taxes
So before I get into the actual column itself, I just wanna tell any of you who visit the beach regularly that if you go at night, BE PREPARED for the high tide! My friend and I went to the beach at night without prior acknowledgement of the tides and we barely made it out alive. Now I have cuts – some of them quite large – all over my hands, legs, and feet… bleh.
Anyway, on to estate taxes. Now, I normally would never think of actually agreeing with the Democratic Leadership Council (DLC) or their Congressional division, the New Democrat Network (NDN), because I think the DLC is a piece of crap infesting the Democratic Party with harmful ideas of “moderation” (read: kowtowing to the Right). But this time, on the issue of estate taxes, they’ve given me a pleasant surprise, not just to the point where I agree with them, but enough so that I’m actually going to repost their work. Shock! Well, I’m not against giving praise where praise is due – plus it saves me the work of having the write my own column. So, without further ado, I give you the DLC…
DLC | New Dem Dispatch | April 12, 2005
A Test of Principle
Get the picture: the federal budget deficit and long-term national debt are spiraling out of control, threatening not only vital public services and the solvency of our retirement system, but the stability of our economy, increasingly in hock to foreign governments. House and Senate Republicans are deeply divided, once again, on a congressional budget resolution for next year. We’re fighting terrorists in Afghanistan and Iraq, and aside from the human costs borne by brave Americans serving their country, the financial costs are rising steadily, and have not been factored into the official budget deficit estimates.
There are a whole host of pressing national challenges that need action, from rapidly increasing health care costs, to our increasing dependence on ever-more-expensive foreign oil, to a broken and increasingly corrupt political system, and on and on.
So what are the Republicans who run the U.S. House of Representatives planning to do tomorrow? Give the Paris Hiltons of this world not just another tax cut, but a complete free ride from taxation of the riches they never earned. It would almost be funny if it were not so serious a matter.
Specifically, the House is voting to make the total elimination of the federal inheritance tax, now scheduled to occur in 2010 and then vanish in 2011, permanent. This would boost the federal budget deficit by an estimated $290 billion through 2015; and by $745 billion through 2021. Add in the interest costs of borrowing the funds to pay for this measure, and the true ten-year cost is nearly $1 trillion.
Sponsors of this outrage will make three equally outrageous arguments to defend it.
The first is that failure to make this abolition permanent would represent a tax increase. The very same people, of course, advertised the original legislation as temporary, in no small part to hide its true costs. If it was temporary then, it’s temporary now, especially since we’ve had an explosion of public debt, a terrorist attack on the United States, and the deployment of hundreds of thousands of American troops overseas in the intervening period.
The second is that the inheritance tax imposes an onerous burden on owners of family farms and family-owned small businesses, forcing them to sell these assets instead of passing them on to future generations.
Even under the pre-repeal inheritance tax, with a $1 million ($2 million per couple) exemption, relatively few family farms and small business were exposed to taxation, and even fewer accorded with the conservative horror story of families being forced to sell farms and businesses to pay the tax. But moreover, virtually all Democrats have supported raising that threshold to $3.5 million (or $7 million per couple), which would exempt virtually all true family farms and small businesses, while preserving 44 percent of current inheritance tax revenues. Indeed, Rep. Earl Pomeroy (D-ND) is offering a substitute amendment in the House to do just that.
The third, and by far most pernicious, argument for eliminating inheritance taxes is that they are necessary to maintain incentives for high earners to accumulate capital. Does anyone remember the 1990s? Somehow, the United States economy created more millionaires and multi-millionaires than in any equivalent period in national history, with the inheritance tax fully in place. All the way back to the early years of the twentieth century, there has been strong bipartisan support for inheritance taxes, as a way to ensure that unearned wealth bears a fair share of the burden of government, and to prevent long-term concentrations of untaxed wealth. Indeed, the federal inheritance tax was first proposed by Theodore Roosevelt, and implemented by that famous tax-and-spend liberal, William Howard Taft.
Opposing this proposal is a matter of fiscal sanity for Congress. For Republicans, it offers a test of their seriousness about public debt, and about making the war on terrorism, not tax relief for the very wealthy, their top priority.
And for Democrats, opposing this proposal is as simple a matter of basic principle as can be imagined. Democrats should also make it abundantly clear that this giveaway decisively and permanently undercuts any argument for changes in Social Security that will add even more to the national debt and indirectly, to the obligations of our retirement system.
We don’t always share the views of some in our party who seem to want to make every single vote in Congress a test of partisan loyalty, since a party that defines itself purely in terms of the opposition’s priorities can’t make its own values clear. But this is an occasion where the positive and negative responsibilities of governing exactly coincide. Democrats should stand up to the “death tax” rhetoric that tries to make a perfectly sensible policy sound like grave-robbing, and have the courage and persistence to explain to the American people the deeply regressive nature of this proposal, which will shift the cost of government from trust-fund babies to hard-working families.
If there was ever a moment when Democrats should be loud, proud and united about exposing the skewed values of George W. Bush’s GOP, this is it.