Wayne O'Leary

The Republican Death Obsession

Republicans have a morbid obsession with death, and it revolves around money. Truth be told, having once gotten it, they and the wealthy elite they represent would really like to take it with them. But since that’s not possible, they’ll settle for keeping as much acquired lucre as possible in the immediate family — all of it, if they can.

Standing in the way is what the GOP, at the behest of its public-relations maven Frank Luntz, insists on calling “the death tax;” that is, the federal estate tax levied on accumulated wealth before it is disseminated to one’s heirs. If all goes according to plan, the misnamed Tax Cuts and Jobs Act working its way through the Ryan-McConnell Congress will abolish, or virtually abolish, the hated estate tax once and for all.

This will be in keeping with the misinformed beliefs of one Donald Trump, an enthusiastic supporter of estate-tax abolition. In an Oct. 23 guest column published under his name in USA Today, the Donald proclaimed, “We are now among the highest taxed nations in the developed world.” That egregiously false claim was advanced by the president of some of the people as the rationale for the $1.5 trillion in top-heavy Republican tax cuts he wants to sign into law.

Trump conveniently forgot, if he ever knew, that Western Europe’s prevailing top income-tax rate (per The Economist) is about 50%, compared to 39.6% in the US. He pointedly ignored as well the grossly exaggerated US corporate income tax (putatively 35%), whose average effective rate, after deductions and credits, is almost identical to the 27.7% average for 30 other member nations of the OECD (Organization for Economic Cooperation and Development), as calculated by the Congressional Research Service.

Instead, the Trump tax rant tried to focus attention on the inclusion of miniscule “middle-class” tax cuts in the GOP plan that will supposedly net the average American household an annual refund of $1,200 - - the Tax Policy Center says $800 — enough to buy a new smartphone.

Interestingly, the president avoided mention of that which he and his fellow Republicans (and their campaign donors) care most passionately about, along with the proposed corporate reductions: repealing the estate tax. That’s because its tentative disappearance won’t benefit ordinary Americans at all.

The Tax-Cutter in Chief wouldn’t want his fellow citizens to know (again, per The Economist) that the so-called death tax applies in the US to less than a third the percentage of inherited estates obligated to pay it in, for example, Great Britain. Only an estimated 1 to 2 percent of American estates annually were assessed the tax between 1987 and 2007, but to Republicans, those bequests represented the people that count.

At present, inherited property in the US is federally taxed at a top rate of 40%, but an extremely generous exemption is applied to the first $5.5 million of an individual bequest ($11 million in the case of couples). The tax is assessed prior to property being passed to heirs, making it an “estate,” rather than an “inheritance,” tax. (Inheritance taxes are those applied to heirs following the transfer of an estate.)

As of this writing, the final disposition of the estate levy under Republican tax writers remains in flux. The GOP House bill would immediately double the exemptions and completely phase out the tax by 2025; the Senate version would also double exemptions, but keep a remnant of the tax for symbolic purposes. However, both the House and Senate agree that the death tax would for all intents and purposes be dead, benefitting a grand total of 0.2% of the population at a cost to the Treasury of $269 billion over a decade.

So how did this onerous levy on the long-suffering rich, America’s only true wealth tax, come into being? Ironically, its initial proponents were progressive Republicans, a lost tribe whose leaders, Robert La Follette and Theodore Roosevelt, made taxation of vast stores of dynastic wealth part of the Progressive Movement’s canon.

TR was the national standard-bearer; he called for a federal inheritance tax as president and made its passage a key ingredient of his campaign for the Progressive or Bull Moose third-party nomination in 1912. His famous New Nationalism speech at Osawatomie, Kansas, (1910) set the Progressive parameters for the toleration of any great fortune in America: “We should permit it to be gained only so long as the gaining represents benefit to the community.” The creation of a dominant hereditary ruling class, a self-perpetuating native aristocracy, was bad for the country socially, politically, and economically, Roosevelt and the Progressives thought; it was, in a word, un-American.

Yet, despite TR’s efforts, it was left to a Democratic Progressive, Woodrow Wilson, to enact actual legislation, in the form of an estate tax, in 1916. This was the Wilson, precursor to the New Dealers and mentor to FDR, forgotten or maligned in today’s milieu of identity politics and racial division. Wilson’s graduated estate tax set the pattern for the next hundred years; it’s the death tax Republicans have been trying to undo ever since.

They managed to lower it a bit in the 1920s, but Franklin Roosevelt, Teddy’s cousin, raised the levy on “economic royalists” to 70% during the Depression, where it remained until America’s plutocrats recaptured the government under Ronald Reagan. Reagan gradually pared the top rate down to 50% by 1985 and simultaneously raised the exemption to its then highest level ($400,000).

The next Republican estate-tax “reform” took place under George W. Bush, who brought the top rate down further to 45%, while raising the individual exemption to an astounding $3.5 million ($7 million for couples) by the end of his term, with the added statutory proviso that the tax would completely disappear by 2010. Total abolition was rescinded during Barack Obama’s first term, but the Democratic president, in thrall to his inner centrist, agreed to a low 35% top rate and a generous $5 million individual exemption, since raised slightly to 40% and $5.5 million, respectively.

That’s where we stand as Republicans respond once more to their death-tax obsession and attempt in the process to satisfy the bottomless greed of their donor base. Teddy Roosevelt, for one, would not be amused.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, December 15, 2017

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