Paul Krugman: Shameless in the Senate

The estate tax – one of the most illuminating examples of modern-day propaganda. It will affect a teensy sliver of the population, yet the Republicans, in their perennial role as water carriers for the filthy rich, have managed to hoodwink many of us into believing this is a “death tax” imposed on all of us. Note that they never call it an “estate tax,” but always the “death tax,” which focus groups show is more effective at alarming the masses. (For a fine description of why the estate tax is in keeping with our Founding Fathers’ vision of America, read Kevin Philip’s great book American Dynasty, in which he writes, “The huge concentration of wealth in the United States would quickly become just what many of America’s founders especially feared, an aristocracy of wealth that was not self-made but inherited.”) To repeal it now, when the Treasury needs every dollar it can get, would be insane. Paul Krugman comments:

Shameless in the Senate
By PAUL KRUGMAN
Published: June 5, 2006

The Senate almost voted to repeal the estate tax last fall, but Republican leaders postponed the vote after Hurricane Katrina. It’s easy to see why: the public might have made the connection between scenes of Americans abandoned in the Superdome and scenes of well-heeled senators voting huge tax breaks for their even wealthier campaign contributors.


But memories of Katrina have faded, and they’re about to try again. The Senate will probably vote this week. So it’s important to realize that there’s still a clear connection between tax breaks for the rich and failure to help Americans in need.

Any senator who votes to repeal the estate tax, or votes for a “compromise” that goes most of the way toward repeal, is in effect saying that increasing the wealth of people who are already in line to inherit millions or tens of millions is more important than taking care of fellow citizens who need a helping hand.

To understand this point, we need to look at what Congress has been doing lately in the name of deficit reduction.

The Deficit Reduction Act of 2005, which was signed in February, consists mainly of cuts to spending on Medicare, Medicaid and education. The Medicaid cuts will have the largest human impact: the Congressional Budget Office estimates that they will cause 65,000 people, mainly children, to lose health insurance, and lead many people who retain insurance to skip needed medical care because they can’t afford increased co-payments.

Congressional leaders justified these harsh measures by saying that we have to reduce the budget deficit, and there’s no way to do that without inflicting pain.

But those same leaders now propose making the deficit worse by repealing the estate tax. Apparently deficits aren’t such a big problem after all, as long as we’re running up debts to provide bigger inheritances to wealthy heirs rather than to provide medical care to children.

And the cost of tax cuts is far larger than the savings from benefit cuts. Under current law — what I once called the Throw Mama From the Train Act of 2001 — the estate tax is scheduled to be phased out in 2010, but return in 2011. According to the Joint Committee on Taxation, making repeal permanent would cost more than $280 billion from 2011 to 2015. That’s more than four times the savings from the Deficit Reduction Act over the same period.

Who would benefit from this largess? The estate tax is overwhelmingly a tax on the very, very wealthy; only about one estate in 200 pays any tax at all. The campaign for estate tax repeal has largely been financed by just 18 powerful business dynasties, including the family that owns Wal-Mart.

You may have heard tales of family farms and small businesses broken up to pay taxes, but those stories are pure propaganda without any basis in fact. In particular, advocates of estate tax repeal have never been able to provide a single real example of a family farm sold to pay estate taxes.

Nonetheless, the estate tax is up for a vote this week. First, Republicans will try to repeal the estate tax altogether. If that fails, they’ll offer a compromise that isn’t really a compromise, like a plan suggested by Senator Jon Kyl, Republican of Arizona, that would cost almost as much as full repeal, or a plan suggested by Senator Max Baucus, Democrat of Montana, that is only slightly cheaper.

In each case, the crucial vote will be procedural: if 60 senators vote to close off debate, estate tax repeal or something close to it will surely pass. Any senator who votes for cloture but against estate tax repeal — which I’m told is what John McCain may do — is simply a hypocrite, trying to have it both ways.

But will the Senate vote for cloture? The answer depends on two groups of senators: Democrats like Mr. Baucus who habitually stake out “centrist” positions that give Republicans almost everything they want, and moderate Republicans like Lincoln Chafee of Rhode Island who consistently cave in to their party’s right wing. Will these senators show more spine than they have in the past?

In the interest of stiffening those spines, let me remind senators that this isn’t just a fiscal issue, it’s also a moral issue. Congress has already declared that the budget deficit is serious enough to warrant depriving children of health care; how can it now say that it’s worth enlarging the deficit to give Paris Hilton a tax break?

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