Heiristocracy: how the GOP got away with cutting the estate tax.

Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth By Michael J. Graetz and Ian Shapiro Princeton University Press, $29.95

To the Democratic mind, there is no tax more just, more moral, more American, than the estate tax. If we must tax someone, who better than those fortunate few who have gobs of money and did nothing to earn it; the children of the wealthy? Every dollar taken from the ranks of Bergdorf blondes is a dollar that need not be taken from working Americans. And so that poor, beleaguered Democratic mind could be excused if it falls into a sputtering, senseless rage with the recognition that Republicans have turned eliminating a levy on the luckiest and least worthy into a legitimate populist movement.

How a populist movement arose to eliminate the most populist of taxes is a political mystery without parallel. Not since World War I has a progressive tax been excised altogether, and yet four years after President Bush signed a phase-out of the estate tax, he has yet to reap a word of backlash. Tempting as it is for Democrats to chalk up their loss on the estate tax to Republican lies or sleight of hand tricks like renaming it "the Death Tax," Death by A Thousand Cuts, by Yale political scientists Michael Graetz and Ian Shapiro, demonstrates that the story is far more complicated.

No doubt, the estate tax debate is riddled with misinformation and misperception. But the phony facts mask a fundamental and far-reaching change in how Americans look at the morality of taxation, one upon which Democrats appear to be on the losing side. Democratic leaders comfort themselves by saying, if people only knew the facts. But "the Democrats' failure," the authors write, "goes to the very core of their approach to convincing the American public that they are right about two of the most fundamental questions in any system of government: how and why the country should tax its citizens."

For all the book's many virtues, thrills are not among them. Those looking for a page-turner that captures the excitement of the legislative process should look elsewhere (and let me know when they find it). Instead, the book reads like a narrative of how termites ate your house. Out of sight and unopposed, the advocates of repeal just munched and munched and munched until support for the tax caved in like a corroded joist.

The story begins in the late '80s, as liberals would expect, with a few rich folks who wanted to keep more of their money. A key early figure in the movement was the boutique financial planner Pat Soldano, who handled the assets for the Mars candy bar family, the Gallo wine family, and the heirs to the Campbell's soup fortune, among others. The effort to repeal the estate tax was just another aspect of Soldano's investment advice. For a relatively small investment--a Heritage study here, some lobbying fees from Patton Boggs there--families might one day reap tax breaks worth hundreds of millions of dollars. It's a bet a growing number of wealthy families were willing to make, offering the leaders of the repeal movement all the resources they would need to make their case heard.

Since the plight of the Gallo heirs was Unlikely to draw many tears around the country, activists smartly latched on to the emotional appeal of family farmers and small business owners. Despite a mountain of data proving that only a tiny fraction of farmers and entrepreneurs were affected, the activists showed that an anecdote beats a statistic any day. One of the most effective was that of Chester Thigpen, an African-American tree farmer from Montrose, Miss., recruited by Jim Martin, one of the leading repeal activists. The grandson of slaves, Thigpen was heaven-sent. Less than a month after Republicans took control of Congress in 1995, Thigpen was testifying before the House Ways and Means Committee. "Right now, people tell me my tree farm could be worth more than a million dollars," he said. "All that value is tied up in land or trees. We're not rich people. My son and I do almost all the work on our land ourselves.... My children might have to break up the tree farm or sell off timber to pay the estate taxes when I die."

Thigpen's story was recycled so many times that at one point, a strategist considered renaming repeal bill The Chester Thigpen bill. There was only one problem. Thigpen's farm was not, in fact, subject to the estate tax. It handily skated in under the minimum threshold, according to Thigpen's son. When the authors asked Chester's son, Roy, if his father had written his own testimony, the son broke up laughing. "Some professors," wrote it and gave it to him to read. Repeal activists were untroubled, as they often were, by facts. Thigpen was an effective stalking horse, and his story democratized the image of the repeal effort.

As the numbers of Americans supporting repeal grew, Democrats responded with the same uncomprehending refrain: But it doesn't affect you. Illinois Senator Dick Durbin tells the story of how he was once asked by an O'Hare Airport baggage handler when he was going to do away with the Death Tax, "so I won't have to pay it." The moral of the story, of course, was that, if only Americans knew the facts, support for repeal would melt away to the two percent of Americans actually affected. In fact, the numbers tell a different story. One CNN poll found that nearly 40 percent of Americans believe that they are in the wealthiest 1 percent of Americans or will be there soon. Only 26 percent had given up hope of reaching the top of the income ladder, a cold splash indeed to dedicated class warriors. For the Democratic strategy to work, they would first need to convince Americans that they were worse off than they feel. Who would vote for someone who tells them they have no chance of achieving the American Dream?

But good old American blind optimism only accounted for some of Americans' resistance to Democratic logic. More troubling for Democrats was the fact that they lost the moral argument--the idea that the fairest tax was the one that hit those most able to pay. Americans increasingly bought the Republican line that the estate tax was doubly unfair--first because it treated some Americans differently than others. Second, because it taxed the same money twice: when it was earned, and later when the earner died. The absurdity of the argument of double taxation has been made before: All kinds of money is taxed more than once, most frequently when, as the case of the estate tax, it changes hands. But facts, as Ronald Reagan said, are stupid things. Polls showed that nearly 90 percent of Americans believe the estate tax is unfair. In 2003, a NPR, Kennedy School, Kaiser poll found that only 15 percent of Americans wanted to preserve the estate tax. One respondent, a retired transportation director for a Delaware school district, said that he knew his estate would not be big enough to be taxed, but he wanted it eliminated anyway. "I knew this gentleman, he's worked his life doing what he does, and does it very well, and I know his kids. He told me once--he said they would have to sell 90 percent of what he's invested in order to pay his taxes. So, you know, it's just not fair."

If it felt like repeal activists were pushing at an open door, it's because, to a large extent, they were. Democrats offered no real alternative to repeal, and no effective argument for preservation of the estate tax. Not unlike the Republicans, the Democratic Party is driven by its constituent groups. But where was the constituency for the estate tax? The pain of the tax was concentrated to a small group with the means to fight for their interests. The benefits, meanwhile, were spread thinly across 150 million taxpayers. The liberal Center for Budgetary Priorities and Policy didn't begin working against estate tax repeal until 1999, four years after Chester Thigpen testified to the Ways and Means Committee. In one clever measure of political attention, the authors note that Republican pollsters had conducted 20 separate studies of the politics of estate tax repeal. Democrats had conducted four polls, and three of these were done after the 2000 election, when, to a large extent, the fight had already been lost.

Graetz and Shapiro are at their best when depicting the subterranean interplay between activists, think tanks, lobbyists, and donors that fuels federal politics. If there's a weakness in their description of how Washington works, it's in their gross underestimation of the influence of campaign contributions. The authors dismiss as naive the suggestion that congressmen fought for repeal for the sake of campaign donations. But I think it's Graetz and Shapiro who are being simplistic. The authors seem to take on face value various congressmen's argument that contribution limits prevent any one donor from wielding undue influence. This is true, as far as it goes. But when well-connected fundraiser organizes an event where $1,000,000 is raised from 1,000 different donors, it's as if he gave all the money himself. His calls get answered. Moreover, when politicians spend so much of their time cultivating people wealthy enough to give a campaign contribution, it has a tendency to shape their thinking. The authors suggest that personal contacts, rather than campaign contributions, persuaded members of Congress, including many Democrats, to support repeal. They quote Rep. Charlie Rangel (D-N.Y.) saying, "everyone in the House knows one person who's affected" by the estate tax. But the chances are, they met that person at a fundraiser. After years of attending fundraisers with the same group of donors, the line between friend and donor gets awfully blurry. A former Senate Democratic leadership aide once complained to me of having to redirect Senators' attention when they returned from fundraising trips. "A fundraiser is not a focus group," he would remind them. It's the rare politician whose perspective is not affected by his or her constant exposure to the wealthy people whose money they need to get elected.

The authors' suggestion for how Democrats can rebut the Republican onslaughts falls short for me, as well. Graetz and Shapiro chide the Democrats for letting Republicans focus attention on the working rich who accumulated the estates, rather than the decadent children receiving them once they died. Many of the people taxed could easily be made to look like the "Paris Hiltons of this world," rather than the Chester Thigpens, they argue. Perhaps this would have helped. But since 40 percent of the country believes that they are or will be in the wealthiest one percent of which Democrats speak, it's just as likely the Republicans could have responded by saying, "Those are your children they're talking about." Even reviving the original argument for the estate tax--preventing the establishment of an aristocracy built on generational wealth--seems doomed to fail. After all, Paris Hilton became Paris Hilton with the estate tax in effect. It seems probable that the ease with which the wealthy circumvent the tax has become one of chief causes of its demise, an argument the authors neglect. Since it accomplishes no clear good beyond the money raised, the estate tax becomes like any other: a necessary evil. Republicans have shown that in the minds of Americans the step from necessary evil to just plain evil is a short one indeed.

If the estate tax debate shows anything, it's that tax politics based on distinguishing Americans by class has failed the Democrats utterly. Something new that reaffirms the connection between all Americans and our obligations to one another, rather than our differences, must soon take its place. For Graetz and Shapiro are profoundly right when they discuss the implications of the estate tax debate for politics and the nation. "This death tax effort has been a critical piece of an attack on the very idea of progressive taxation in America.... They know that what they want cannot be accomplished at a fell swoop. Hence their strategy: death by a thousand cuts. What strategy is there on the other side?"

Daniel Franklin is a consulting editor of The Washington Monthly.