Heiristocracy: how the GOP got away with cutting the estate tax

Washington Monthly, May, 2005 by Daniel Franklin

Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth By Michael J. Graetz and Ian Shapiro Princeton University Press, $29.95

To the Democratic mind, there is no tax more just, more moral, more American, than the estate tax. If we must tax someone, who better than those fortunate few who have gobs of money and did nothing to earn it; the children of the wealthy? Every dollar taken from the ranks of Bergdorf blondes is a dollar that need not be taken from working Americans. And so that poor, beleaguered Democratic mind could be excused if it falls into a sputtering, senseless rage with the recognition that Republicans have turned eliminating a levy on the luckiest and least worthy into a legitimate populist movement.

How a populist movement arose to eliminate the most populist of taxes is a political mystery without parallel. Not since World War I has a progressive tax been excised altogether, and yet four years after President Bush signed a phase-out of the estate tax, he has yet to reap a word of backlash. Tempting as it is for Democrats to chalk up their loss on the estate tax to Republican lies or sleight of hand tricks like renaming it "the Death Tax," Death by A Thousand Cuts, by Yale political scientists Michael Graetz and Ian Shapiro, demonstrates that the story is far more complicated.

No doubt, the estate tax debate is riddled with misinformation and misperception. But the phony facts mask a fundamental and far-reaching change in how Americans look at the morality of taxation, one upon which Democrats appear to be on the losing side. Democratic leaders comfort themselves by saying, if people only knew the facts. But "the Democrats' failure," the authors write, "goes to the very core of their approach to convincing the American public that they are right about two of the most fundamental questions in any system of government: how and why the country should tax its citizens."

For all the book's many virtues, thrills are not among them. Those looking for a page-turner that captures the excitement of the legislative process should look elsewhere (and let me know when they find it). Instead, the book reads like a narrative of how termites ate your house. Out of sight and unopposed, the advocates of repeal just munched and munched and munched until support for the tax caved in like a corroded joist.

The story begins in the late '80s, as liberals would expect, with a few rich folks who wanted to keep more of their money. A key early figure in the movement was the boutique financial planner Pat Soldano, who handled the assets for the Mars candy bar family, the Gallo wine family, and the heirs to the Campbell's soup fortune, among others. The effort to repeal the estate tax was just another aspect of Soldano's investment advice. For a relatively small investment--a Heritage study here, some lobbying fees from Patton Boggs there--families might one day reap tax breaks worth hundreds of millions of dollars. It's a bet a growing number of wealthy families were willing to make, offering the leaders of the repeal movement all the resources they would need to make their case heard.

Since the plight of the Gallo heirs was Unlikely to draw many tears around the country, activists smartly latched on to the emotional appeal of family farmers and small business owners. Despite a mountain of data proving that only a tiny fraction of farmers and entrepreneurs were affected, the activists showed that an anecdote beats a statistic any day. One of the most effective was that of Chester Thigpen, an African-American tree farmer from Montrose, Miss., recruited by Jim Martin, one of the leading repeal activists. The grandson of slaves, Thigpen was heaven-sent. Less than a month after Republicans took control of Congress in 1995, Thigpen was testifying before the House Ways and Means Committee. "Right now, people tell me my tree farm could be worth more than a million dollars," he said. "All that value is tied up in land or trees. We're not rich people. My son and I do almost all the work on our land ourselves.... My children might have to break up the tree farm or sell off timber to pay the estate taxes when I die."

Thigpen's story was recycled so many times that at one point, a strategist considered renaming repeal bill The Chester Thigpen bill. There was only one problem. Thigpen's farm was not, in fact, subject to the estate tax. It handily skated in under the minimum threshold, according to Thigpen's son. When the authors asked Chester's son, Roy, if his father had written his own testimony, the son broke up laughing. "Some professors," wrote it and gave it to him to read. Repeal activists were untroubled, as they often were, by facts. Thigpen was an effective stalking horse, and his story democratized the image of the repeal effort.

As the numbers of Americans supporting repeal grew, Democrats responded with the same uncomprehending refrain: But it doesn't affect you. Illinois Senator Dick Durbin tells the story of how he was once asked by an O'Hare Airport baggage handler when he was going to do away with the Death Tax, "so I won't have to pay it." The moral of the story, of course, was that, if only Americans knew the facts, support for repeal would melt away to the two percent of Americans actually affected. In fact, the numbers tell a different story. One CNN poll found that nearly 40 percent of Americans believe that they are in the wealthiest 1 percent of Americans or will be there soon. Only 26 percent had given up hope of reaching the top of the income ladder, a cold splash indeed to dedicated class warriors. For the Democratic strategy to work, they would first need to convince Americans that they were worse off than they feel. Who would vote for someone who tells them they have no chance of achieving the American Dream?