Wyden Throws Away Estate Tax Vichy Water

Steve Novick

At the end of “Casablanca” (which is, of course, the greatest movie ever made), after Bogart gives Bergman up and shoots Major Strasser, Captain Renault (Claude Rains) says: "Well Rick, your not only a sentimentalist, but you've become a patriot." Rick answers, "Maybe, but it seemed like a good time to start." Renault replies "I think perhaps you're right." Then he throws a bottle of Vichy water (representing the collaborationist government of Vichy, France, for you young folks) into the garbage can and kicks it.

Last week, to my great joy, our own Senator Ron Wyden threw away his own personal bottle of Vichy water. For years, my (and much of the Left’s) biggest beef with Senator Ron Wyden was his support for repeal of the estate tax. Last week, Wyden switched sides. He publicly recognized that in light of wars, deficits, hurricanes and the like, we can’t keep talking about repealing a tax that applies to the richest 2% of Americans.

It should go without saying that a ‘no’ vote on ‘permanent American aristocracy’ is the only moral choice. Repeal would cost $745 billion between 2011 and 2021. Is giving a tax break to really rich people four times as important as recovering from Hurricane Katrina? The babble about ‘farms’ and ‘small businesses’ is malarkey; in 2004, there were only 440 taxed estates (about 2% of all taxable estates) where farms or small businesses represented more than half of the assets, and most of those paid an effective tax rate of less than 10%. Exempting the first $1.5 million – as the estate tax does – leaves out most ‘family farms.’ In fact, the estate tax repeal advocates are unable to cite a single example of a ‘family farm’ that the family had to sell in order to pay estate taxes.

But make no mistake: this is a tougher step, politically, than, for instance, Wyden’s initial vote against the war (he was one of just 23 Senate noes).

Every poll shows that a majority of people want to get rid of the estate tax, even when you don’t call it the ‘death tax.’ If you prod further and give them a ‘reform not repeal’ option, they might come with you, but straight up, should we repeal, people say yes. It’s goofy; even people who agree that “the rich don’t pay their fair share of taxes” want repeal. It seems to tap into some primal idea that ‘you should be able to give all your stuff to your kids, whoever they are.’ To change people’s minds, we’re going to have to do a lot better on the big-picture issue of explaining to people that any vote for a tax cut is a vote to raise someone else’s taxes or to cut an important service.

This is at least the third time in recent months that Wyden has earned a serious “attaboy” from the purists. He voted against the bankruptcy bill and was one of only 12 votes against the original Senate version of the energy bill (that was better than the final bill), denouncing it as a sellout to big oil. No, I don’t like his voting for CAFTA either. But we need to give credit where credit is due. Darlene Hooley, last I checked, still supports estate tax repeal and peddles the ‘family farms’ lie. And Gordon Smith, the Senator from VISA, continues to support anything that increases the deficit, voting for every tax cut the comes down the pike while winning undeserved plaudits from the left by opposing cuts in Medicaid.

So give Ron Wyden a call. The number’s 503-326-7525. Tell him you’re proud of him. And if you’d like to quote Casablanca, you can take your pick of lines. If you want to paraphrase Bogart, you could say: “Ronnie, I think this is the renewal of a beautiful friendship.” But you could also use Paul Henreid’s (Victor Laszlo’s) line to Bogart: “Welcome back to the fight. This time, I know our side will win.”

  • C2TBF (unverified)

    Here's a thought. The estate tax enriches tax lawyers at the expense of our federal tax revenue coffers. Your sliver of the richest 2% don't pay the tax, they pay tax lawyers to achieve effective tax rates of around 12%, i.e. Theresa Heinz-Kerry's tax rate.

    Those who do pay the estate tax are predominantly small family business owners who achieved success through decades of hard work, but who don't have the wherewithal to cheat the system before dying. These are the types of businesses Oregon is in dire need of building into its tax base.

    I can't believe you moronic lefties will force a good guy like Wyden to abandon his better judgement. If you want to balance the federal deficit, follow Steve Forbes advice and establish a flat income tax of 17% - Theresa will take it because she has to pay her tax lawyers at least 5% a year to achieve her 12%. Get it? That taxable 5% will be new money in the federal coffers, although it may result in lesser donations from tax lawyers to the Democratic Party.

    Because of Wyden's unfortunate capitulation to people like you, we have all lost. But I feel for him- I can't imagine having to answer to unthinking political constituents such as yourself.

  • Jeff Bull (unverified)

    Quick response to C2TBF: apart from your argument in favor of the flat tax (or a hyper-simplified tax code - which I'm OK with), I'm wondering how closely you read the post. Assumng Novick's numbers are correct (should do links, Mr. Novick, so we can check your data), we're looking at a total of 440 taxable estates that meet the situation you're describing. Now, it could be a shame that these people got hit - then again, it might not. In any case, 440 ain't exactly a big number, nor is it a big chunk of the taxed estates listed (again, Mr. Novick, where did these come from?) one ought to question just how much the broader economy suffers under this tax. That seems a useful lens through which to view the whole question.

    Returning to your larger point, I'm all for a tax system that simply says, "you made this much last year (combining capital gains, salary, bonuses, etc)? Very good. You owe $_)." Then again, I'm pretty certain it'll be harder than that.

  • C2TBF (unverified)

    Jeff - Ah, points well-taken, but a couple points are important to keep in mind here. In Mr Forbes' and other flat-tax proposals, the larger issue of tax-equitability is the abolition of the payroll taxes, which land on the heads of working stiffs like a ton of bricks, and which people like Ms Heinz-Kerry have never had to pay. And the fact (perhaps it's a fact) that only 440 families would get hit by the estate tax is more a testimony to the number of families who successfully avoid paying it, by incorporating or what-have-you and paying lawyers tens of thousands of dollars in lieu of the estate tax.

    There are real issues here that real politicians like Mr Wyden could be paying attention to if he didn't have to placate the wild fantasies of blueoregon readers.

  • Steve Novick (unverified)

    First of all, there were 18,000 taxable estates in 2004; in only 440 was an interest in a small business or family farm the majority of the value of the estate. Most really rich people have gobs of stock in big businesses. Second, here's the link to sources and I apologize for not posting it earlier. http://www.factcheck.org/article328.html

  • Sid Leader (unverified)

    The Associated Press spent a year trying to find one American family who "lost" or sold their business because of the estate tax.

    Turns out, there are NONE. Not one in past 30 years!

    The estate tax is an urban legend, like W's Guard service, WMD in Iraq and a college diploma in Karl Rove's briefcase.

  • Tom Civiletti (unverified)

    As a less than moronic lefty, it seems to me that if some of the hyper-rich are avoiding the estate tax, it would be smarter to ammend the law to prevent this rather than to repeal a tax which helps counter the growing polarity of wealth and the growing national debt.

  • C2TBF (unverified)

    I hear you Tom. But the smart lawyers for the government will never be as smart as the smart lawyers for the rich people. (we caught a break with getting Roberts)

  • Bert Lowry (unverified)

    I just called Senator Wyden's office to thank him for switching his position on the repeal of the estate tax. The very nice woman who answered the phone told me he has not switched his position. He has always been opposed to repealing the estate tax.


  • Aaron (unverified)

    I hope that Sen Wyden does truly change his actions(votes) towards this issue(plus some others like FREE TRADE AGREEMENTS).

  • (Show?)

    Personally, on this issue, I'm with the dad of the richest guy in the world - Bill Gates Sr.

  • C2TBF (unverified)

    Kari- If all rich people were as altruistic and upstanding as Mr Gates Sr, we wouldn't have this problem now would we? Don't hold your breath. Just keep in mind that, while you may be on the side of the estimable Mr Gates Sr on this issue, you are also on the side of blood-sucking tax lawyers and K Street lobbyists who hold tremendous rents on our economy for which the tax payer gets nothing in return. Talk about a "legal-industrial complex" with no benefits; you're just feeding the monkey on our backs. This is money that could be better spent on things like health care and education.

    Tax reform and simplification is one of those issues the Dems should jump on- it's a no-brainer, and the first people to benefit will be those who pay the highest percentage of their incomes in payroll taxes, i.e. people who fit squarly in the Democratic demographic. Where's your next Bill Clinton going to come from? When am I going to be able to vote for a Democrat again (last time was for Bill in '96)?

  • David English (unverified)

    I'm am also glad that Wyden voted against the repeal of the Estate tax. Rich people may whine and moan at the fact that they didn't get there way, but they have to be reminded how many large tax cuts the Bush Administration has given them.

    Even in times of war and soaring deficits, the rich have still gotten the majority of the tax relief. They need not complain.

    Just an side note, if anyone wants to read a good book, pick up The Great Unraveling by Paul Krugman. I'm reading it right now and it's interesting.

  • C2TBF (unverified)

    Last comment from me. Tom, I completely share your concerns on "the growing polarity of wealth and the growing national debt" in this country, as do most of the readers of this site I'm sure. I don't think the estate tax is the way to go, however.

    Smart tax policy should create incentives and disincentives that lead people to make the investment and consumption decisions that create the greatest good for the greatest number of people- I think you would agree with that. I would go beyond that and say that the "incentivizing" effects of tax policy are a more critical consideration than the actual "projected" revenues they may or may not raise. For example, higher gasoline taxes or SUV taxes would be a good idea primarily for the positive effects they would have on our consumption behaviors and by necessity our energy and foreign policies as well. They will outweigh whatever costs are incurred. I definitlely do not give the GOP a pass on this score, but that's a judgement call entangled with some assinine environmental regulary tangles. But there's no question that the power to influence people's economic behavior is absolutely transcendant to the forward march of progress to whatever social ideal your little heart desires. That's what money is, by the way, until somebody decides to print or tax too much of it and it loses its meaning.

    Another tax policy issue critical to achieve our shared goals is its sheer efficiency, or inefficiency, in collecting the desired net tax revenue. That is, how much does a given tax policy cost to collect, monitor, enforce, interpret... evade?! The estate tax is notoriously ineffecient in this respect. Of course it's politically quite expedient given its appeal to people's simpler impressions of how things work, but I don't think our national politics can afford to dwell there much longer. Certainly the Democratic Party can't and should consider getting its act together and re-booting its economic policies that have been down since the 90's.

    Reinstate the estate tax and, voila, more bank accounts will open offshore. Like magic. The absolute last thing that would result would be a more equitable distribution of wealth, since it disincentivizes wealth creation, except of course of the lawyerly kind.

  • Jody Wiser (unverified)

    That Bert got misinformation when calling Wyden’s office is rather odd. Why would Wyden’s office lie on this? There clearly has been a change of heart. When a group from the Coalition to Preserve the Estate Tax was in DC lobbying Wyden in February, Wyden was still making excuses for his votes to repeal the estate tax. As recently as May 26, I asked his chief of staff, Josh Kardon, “Can you assure me that the Senator will not vote for repeal?” Josh said he could not give any assurances about Wyden’s vote.

    We’ve now been informed that: Wyden will not vote for repeal, nor will he vote with proposals like that of Jon Kyl, which would bring near repeal—with an exemption level $8-10 million and a rate of 15%--he will vote with the Democrats.

    However the Democrats are talking still about giving away half the estate tax revenue, according to Joshua Shankman. That was before Katrina, however.

    Hopefully, the tipping point has come and there will be no additional tax cuts for the wealthy.

    My vote would be to stop the corrosion of this tax where it is now. There are 3 million Oregonians, 31,000 of whom will die this year. Of those, approximately 250 will pay the federal estate tax this year with today’s exemption level of $1.5 million. Current federal law raises the exemption level to $2 million on January 1, 2006, at which point the number of decedents paying federal estate tax will drop to around 100 according to statistics provided by the Oregon Department of Revenue. Wyden is to be commended for deciding to represent the interests of more than 99% of his constituents who will bear the brunt of any additional cuts to the estate tax—they will pay more, live with less, or transfer to their children the inheritance of our federal debt. Now’s the time to put the pressure on Smith to do the same.

    BTW, the polling on the estate tax is changing. A recent poll of 2440 voters conducted in late August in Maine, showed that support for the estate tax was strong among both Republicans and Democrats, with over half of responding Republicans, 74% of Democrats, and 67% of Independents opposing repeal and favoring reform. See www.faireconoimy.org for more. Another national poll showed 59 percent of Americans across the political and income spectrum favor estate tax reform as opposed to 29 percent who favor outright repeal -- a 2 to 1 ratio. The poll was sponsored by the Coalition for America’s Priorities, of which United for a Fair Economy (UFE) is a member. The poll findings can be seen at http://www.coalition4americaspriorities.com.

connect with blueoregon