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Jesse Singal

The estate tax mistake

By Jesse Singal
July 30, 2010

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LAST WEEK, Abigail Disney, a filmmaker and an heiress to the Disney family, defended the estate tax eloquently: “My grandfather [Roy Disney] would be the first person to tell you that he’d managed to amass his fortune not in spite of, but because of, the American system,’’ she said. “After all, without reliable and safe roads there would be no such thing as Disneyland; without high-functioning legal systems and a well-regulated business environment there would have been no copyright protection for Mickey Mouse.’’

It’s a simple, powerful point: Even if they’re talented and have made every right move, the extremely wealthy do owe something to a system that provides them with countless legal protections and business advantages.

It’s too bad we haven’t heard Disney’s sentiments echoed from the Democratic Party. But it’s not surprising, because the estate tax is a case study in a common Democratic affliction: an inability to stay ahead of Republican messaging and to project a clear, compelling lawmaking narrative.

Since the 1980s, a small group of the nation’s wealthiest families have worked tirelessly with conservative politicians and activists to repeal the estate tax, and have largely succeeded in hijacking public perception of it through misinformation: that it greatly burdens small businesses and farms, and that it’s double taxation (numerous studies have shown it isn’t, and many inherited assets were never taxed in the first place).

In 2001, their goal was in sight after President Bush signed into law cuts to the tax. But for slightly esoteric reasons, the cuts had to come in a strange way — the tax would get looser and looser for the next several years, would disappear entirely in 2010, and then would come back at its old, higher level in 2011.

Thanks in part to Republican refusals to sign on to an extension of the tax in 2009, Democrats failed to bring it back by January 1, making for a strange year that is very good, financially speaking, for the heirs of the extremely rich. George Steinbrenner’s family could end up saving around half a billion.

And now, time is ticking down for Democrats to stand up for a strong estate tax. It’s unlikely Congress will let the tax lapse to its old level, and as Democrats approach the midterms they will become more and more susceptible to compromises that will deny the nation billions of dollars it needs — helping only a small handful of mega-rich families in the process.

There are various proposals on the table — from President Obama’s decent one, which would keep things at the 2009 level, to Washington Representative Jim McDermott’s better version, with lower exemption levels, to Arkansas Senator Blanche Lincoln’s rather embarrassing effort (which would cost an estimated $544 billion over the next decade, according to the AFL-CIO).

But whichever one wins out, this long-running battle is a good example of Democratic weakness. The party, as usual, has been unable to control the message — or to rein in their own in the Senate. In 2009, 10 Democrats voted for an earlier attempt on Lincoln’s part to weaken the tax (Lincoln also joined Ben Nelson as the only Democrats to vote for a proposal to kill the tax outright last week).

There’s never been an organized, unified campaign from the party to get the truth out about this issue, paving the way toward making the tax permanently strong. And there’s been little effort to point out the sheer hypocrisy of Republicans (and some Democrats) expressing deep concerns about a $34 billion unemployment relief extension on the grounds of fiscal responsibility, but then turning around and opposing a strong estate tax — a refusal which could end up costing much, much more.

It’s one thing to say that Democrats are unable to convince Americans that they stand on the right side of complicated, multifaceted issues. But this isn’t one of those issues, especially during an economic crisis. In the wake of decades of intense lobbying, the Democrats have done what they do best: very little. And it could cost America billions of dollars it can scant afford to be without.

Jesse Singal is a frequent contributor to the Globe.

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