WSJ's Wessel: Populist Scythe Aids 'Death Tax' Foes

[question everything]

The Wall Street Journal

April 14, 2005

CAPITAL
By DAVID WESSEL

Populist Scythe Aids 'Death Tax' Foes
April 14, 2005; Page A2

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The estate tax this year will fall 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, according to the Brookings Institution-Urban Institute Tax Policy Center. Only 440 -- that isn't a typo -- will be estates in which half or more of the assets are farms or family-owned businesses, the cases so highly publicized by those who want to kill the tax. 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could a tax that applies only to the richest 2% of the American public become anathema to 70% of the population and be repealed by bipartisan votes in both the House and the Senate?"

(snip)

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."

(snip)

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."

The case that the well-off should be taxed at higher rates than others remains popular in polls but no longer is a given in American politics. Just listen to the talk about a flat tax or a national sales tax. "This death-tax effort has been a critical piece of an attack on the very idea of progressive taxation in America...that those who have more should contribute a larger share of their resources to support the government," Mr. Graetz says. 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.

Write to David Wessel at [e-mail]

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