Saturday, June 10, 2006

A(nother) Floyd Norris "Why Oh Why" Moment

by Tom Bozzo

This arguably should provoke a stronge reaction than yesterday's from Brad DeLong (regarding which, see here from the Archives).

Here's Norris's lede, from this morning's NYT "Off the Charts" column:
The estate tax in the United States — called the "death tax" by its opponents — affects very few people, but many others have dreams of being rich enough to be covered by it. Perhaps that explains the vehemence of the opposition to it.
...or perhaps it's the concerted and highly mendacious marketing campaign waged by estate tax opponents. I probably shouldn't discount the strength of money delusion, but the anti-estate-tax movement is fundamentally about as grass roots as Hands Off the Internet. Here's Krugman, via Economist's View:
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...
And here's the GOP propagandist Frank Luntz, from the Frontline documentary The Persuaders:
Look, for years, political people and lawyers -- who, by the way, are the worst communicators -- used the phrase "estate tax." And for years they couldn't eliminate it. The public wouldn't support it because the word "estate" sounds wealthy. Someone like me comes around and realizes that it's not an estate tax, it's a death tax, because you're taxed at death. And suddenly something that isn't viable achieves the support of 75 percent of the American people. It's the same tax, but nobody really knows what an estate is. But they certainly know what it means to be taxed when you die. I argue that is a clarification; that's not an obfuscation.
The last sentence, of course, is a lie; Norris did get the "affects very few people" part right. From the Center on Budget and Policy Priorities:

Only 0.5 percent of estates now pay any estate tax whatsoever, and this number is falling.

  • The value of an estate that is exempt from taxation has increased from $1.35 million per married couple in 2000 to $4 million per couple in 2006, and will increase further to $7 million per couple in 2009. (The exemption levels are half these amounts for individuals.)
  • As a result of the increase in the exemption level, the number of taxable estates has dropped from more than 50,000 in 2000 to fewer than 13,000 in 2006, and it will fall to about 7,000 in 2009. In percentage terms, that means a little over 2 percent of all estates were subject to the tax in 2000, 0.5 percent are subject to the tax today, and by 2009 that number will fall to 0.3 percent, meaning only 3 out of every 1,000 people who die will owe any tax.
  • Proponents of estate-tax repeal frequently argue that repeal is needed to prevent large numbers of family-owned farms and businesses from having to be liquidated to pay the tax. A recent Congressional Budget Office study exploded this myth. It estimated that if the estate tax had existed in its current form back in 2000, 90 percent of the farm estates that owed estate tax that year — and nearly three-quarters of the family-owned businesses that owed estate tax that year — would have been entirely exempt from the tax. Had the tax existed in its 2009 form back in 2000, fewer than 100 family businesses and only 65 farm estates nationwide would have owed any estate tax. Further, CBO found that of these family businesses and farms, most would have sufficient liquid assets to pay the tax without having to sell any of the business or farm assets.
Norris offers an additional bonus in the second paragraph:
But the estate tax will return in 2011 if Congress does not act first, with just $1 million in assets protected from tax. [Emphasis added]
An exemption for "just" $1 million in assets would exempt the vast majority of Americans from the estate tax. Only around 10% of U.S. households have $1 million in assets; recall that the median household had a net worth of a whopping $93,100 as of the 2004 Survey of Consumer Finances. Net assets tend to peak just before retirement, unless you have Neutron Jack's employment contract, so many relatively well-to-do households won't die in posession of a taxable estate.

In the credit-where-due department, burial of the lede aside, Norris gets a point or two for mentioning the narrowness of the estate tax's incidence, and explaining why a double taxation argument advanced by would-be repealers isn't really true, either. So there's something — and Norris may well think he's doing God's work in putting those issues in the NYT business section. But there's no reason, leading off with the politics of repeal, that he couldn't have mentioned the actual politics of repeal.
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