Politics

Death (Tax) Takes A Holiday

By CBSNews.com staff CBSNews.com staff

March 14, 2001 / 6:01 PM EST / CBS

In his latest Against the Grain commentary, CBSNews.com's Dick Meyer takes a look at the most unpopular tax of all: the so-called death tax.

The first major CBS News/The New York Times poll since President Bush took office has just been completed. A surprising and fascinating result is that 71 percent of those polled oppose the current estate tax, better known to Republican speechwriters as the death tax.

It is, as CBS News Survey Analyst Sarah Dutton points out, "the only place in the poll where there was a real consensus." Partisanship did not affect the results: 74 percent of Republicans object to the estate tax, as do 69 percent of Democrats. To hammer home the point, 81 percent of those polled also believe there should be no estate tax for those who inherit small businesses, farms and ranches.

To put this in a broader public opinion context, the poll shows that on matters of tax and fiscal policy, the public agrees on virtually nothing.

Can you save social security, spend more on education and cut taxes? No way, according to 43 percent; sure, say 48 percent. Whose tax plan is fair, Bush's or the Dems? Bush wins by a decisive margin of 44 percent to 43 percent. Bush's cuts are fair to all Americans in the estimation of 38 percent of those polled, but they only benefit the rich according to the other 56 percent.

To put this in a broader, real economic context, remember that fewer than 48,000 taxpayers – less than 2 percent of yearly deaths – pay any estate taxes. Half the revenue from the estate tax comes from just 5,000 legacies a year leaving $5 million or more behind. Only estates over $675,000 are taxed at all.

Bottom line: few people in our poll will actually have to deal with estate taxes. It's taxing the "other guy" – something people usually approve of wholeheartedly – that bugs people. "Don’t tax him, don't tax me, tax that guy behind the tree," runs a popular rhyme with Ways and Means Committee folks. In this case, the guy behind the tree probably owns the whole forest and the nearby trout pond.

But quite to the contrary, taxing inheritances is overwhelmingly unpopular. How come?

Democratic pollster Harrison Hickman suggested the current opposition to the estate tax is probably based on confusion and skilled political marketing. Hickman said, "people grossly overestimate" the chances that the estate tax will effect them personally. And he admits that President Bush "has done a pretty good of selling it." He thinks the reason congressional Republicans have separated the estate tax repeal from the rest of the income tax package is that the estate tax will be easy to pass on its own later this year.

Perhaps. Or maybe it has more to do with the role that leaving some financial legacy for your children and heirs plays in our American conept of "making it," as well as being a good parent. Perhaps people have a secret fantasy that there's a rich, reclusive dying uncle out there for them. I don't know.

I do know that when gazillionaires Warren Buffett and George Soros recently signed a pronouncement in The New York Times entitled, Call to preserve the Estate Tax, my instant gut reaction was to want the damn thing repealed on the spot. They even have a Web site, www.responsiblewealth.org. Check it out. If you have a few hundred million crackers you don't want your kids to have, it’s the place for you.

The Sage of Omaha and his fellow travelers make the usual argument that cutting the estate tax by definition means more of the tax burden is placed on lower incomes. That's true, but almost trivial since the revenue from the estate tax is so small in the big budget picture.

They seem more impressed with a kind of econo-moral argument. Buffet said that allowing inheritances is like "choosing the 2020 Olympic team by picking the eldest sons of the gold medal winners in the 2000 Olympics." A clever debating point, but it's hardly a justification for a highly confiscatory tax. (I mean that in the nicest way, Uncle Warren). Certainly there's nothing in the law to prevent anyone from giving his or her money away to anyone or any group, even the U.S. Treasury.

The estate tax is paradoxically all-American and un-American. Leaving an inheritance is a noble part of the American dream; gaining wealth, position and success through inheritance is not.

That is exactly why the estate tax has had such a convoluted history in this country. It was first levied in the 1790s, but repealed after five years. It was imposed and repealed twice more over the centuries – and it may happen again.