Decision Time for Wyden on the Dynasty Dividend

Jon Perr

In the wake of Katrina's devastation along the Gulf Coast, Americans should be united in providing relief, resources and support to all in need.

But sadly, that massive relief effort will take place during a time divisive - and fundamental - debate about the very meaning of national unity in the United States. As New Orleans struggles for survival, the President and his amen corner are waging a full scale assault on the estate tax, what they derisively (and effectively) term the "Death Tax." They will continue to pursue this massive transfer of the U.S. treasury to America's wealthiest, even as a mountain of evidence shows that successive Bush budget cuts devastated New Orleans' disaster preparedness and levee maintenance.

Oregon Senator Ron Wyden will be at the center of it.

Wyden is one of a handful of swing votes being targeted by conservative, anti-government groups in the lead up to Senate debate this week. The Club for Growth, described by its founder Stephen Moore as "the tax-cut enforcer in the Republican party", is running ads here urging Oregonians to pressure Wyden to end the "death tax." The ads are apparently effective: perhaps in response to CFG ads against him in New Hampshire, 2008 GOP presidential hopeful John McCain has indicated he will vote to stop an anticipated Democratic filibuster of the Kyl estate tax repeal.

Bill Sizemore and Don Mcintire ally Grover Norquist of Americans for Tax Reform has gotten into the act as well. Norquist, whose dream for the federal government is to "drown it in a bathtub", wrote Senator Wyden a friendly letter in July. Citing a resolution passed by the Oregon House calling for a permanent repeal of the estate tax, Norquist urged Wyden not to "be persuaded to accept any compromise proposal which would preserve the estate tax but lower the rate. History shows that the tax will slowly creep back up and the economic burden will remain."

Sadly for supporters of America’s best progressive traditions of tax fairness and burden sharing, Ron Wyden’s record on this issue is not promising. In 2001, Wyden voted for President Bush’s 2001 estate tax reform. And in May of 2002, Wyden declared his commitment to make the repeal permanent:

I am announcing to you today that I have made my decision on the upcoming estate tax repeal vote. I will cast my vote to end this tax, and I will do it the name of issues that Democrats hold dear.

Democrats believe in standing up for working families. No one will suffer more than the employees of family-owned companies in this state that will break up, or sell out to larger corporations, in order to satisfy their estate tax obligations.

Democrats believe in standing up for the environment. Yet most environmentalists have never thought about what happens to farmland and timberland when heirs are forced to quickly pay their estate tax bills.

If you oppose losing farmland to strip malls, or if you worry about unwise forestry practices on private lands, you should stand with me and work to repeal the estate tax. The estate tax is anti-worker, anti-environment, and anti-Oregon, and it is time for it to go.

But as both a matter of fact and public policy, Wyden is dead wrong. In 2001, fewer than 2% of all American families paid the estate tax; today the figure is under 1%. As David Cay Johnston, author of Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich -- and Cheat Everybody Else, conclusively demonstrated, the Republican tale American family farms at risk due to the estate tax is just that – a myth. Writing in April 2001, Johnston showed the reality of the impact of the estate levy on family farmers:

But in fact the Riekenas [whose land alone is worth more than $2.5 million] will owe nothing in estate taxes. Almost no working farmers do, according to data from an Internal Revenue Service analysis of 1999 returns that has not yet been published. Neil Harl, an Iowa State University economist whose tax advice has made him a household name among Midwest farmers, said he had searched far and wide but had never found a farm lost because of estate taxes. "It's a myth," he said. Even one of the leading advocates for repeal of estate taxes, the American Farm Bureau Federation, said it could not cite a single example of a farm lost because of estate taxes.

President Bush, the Republican Congress and its amen corner have from the beginning falsely claimed that the levy devastates family farms and small businesses, the Republicans are in fact seeking to protect only the very richest Americans. Their 2001 tax package lowered the rate and raised the estate exemption to $1 million, and after hitting a level of $3.5 million in 2009, eliminates the tax altogether for tax year 2010. Bush's goal now is to make the elimination of the estate tax permanent starting in 2011.

The cost to the American taxpayer - and national bargain - is staggering . At a time of unending $300 billion budget deficits, the reform of the estate tax costs the U.S. $20 billion a year through 2010. After that, the Congressional Budget Office estimates the revenue loss could top $70 billion annually. For some perspective, the Oregon Center for Public Policy notes that figure is larger than all federal spending on K12 education, Veterans’ programs or even homeland security. Even the faithfully pro-Bush web site Redstate.org recognized this reality in a piece titled, “Estate Tax Repeal Now Fiscally Irresponsible “ With a $1 trillion price tag over a decade, the impact of a permanent estate tax repeal on basic services - and on the tax bill of the typical American family - will be dramatic. (And as I’ve written elsewhere, the residents of New Orleans are already paying that price.)

But an even more important principle for American democracy is at stake in the debate over the estate tax. A cornerstone of progressive societies for over 100 years, the estate tax seeks to prevent the rise and entrenchment of a permanent aristocracy of money, "dividend dynasties" with growing political power as they clip coupons. (As mentioned above, the estate tax as a result is paid by fewer than 1% of American families.) Along with progressive taxation, the estate tax helps provide one of the fundamental underpinnings of the American social contract: those who disproportionately enjoy the benefits of our economic system are morally bound to contribute disproportionately to its maintenance. With their war on the estate and capital taxes, the Republicans are seeking to permanently break that American contract, putting the burden of taxes squarely and increasingly on wage earners.

So Ron Wyden has a decision to make. It should be an easy one. But as with many in politics, it all comes down to what you believe.

UPDATE:  Here is contact information for Senator Wyden. An email form is available here.

• Washington DC Office (202-225-5244)
• Portland Office (503-326-7525)
• Eugene Office (541-431-0229)
• La Grande Office (541-962-7691)
• Medford (541-858-5152)
• Bend Office (541-330-9142)
• Salem Office (503-589-4555)

By Jon Perr Sept. 04, 2005