Tuesday, October 29, 2002

Death and Taxes-Only a partial take-apart on Krugman today. He has a decent eulogy for Wellstone, then veers back into familiar terrain, going after the estate tax repeal.
On one side, the inclusion of estate tax repeal in last year's federal tax cut is the most striking example to date of how our political system serves the interests of the wealthy. After all, the estate tax affects only a small minority of families; the bulk of the tax is paid by a tiny elite. In fact, estate tax repeal favors the wealthy to such an extent that defenders of last year's tax cut — like Senator Charles Grassley, who published a misleading letter in last Friday's Times — always carefully omit it from calculations of who benefits. (The letter talked only about the income tax; had he included the effects of estate tax repeal, he would have been forced to admit that more than 40 percent of the benefits of that tax cut go to the wealthiest 1 percent of the population.) To eliminate the estate tax in the face of budget deficits means making the rich richer even as we slash essential services for the middle class and the poor. On the other side, the estate tax debate illustrates the pervasive hypocrisy of our politics. For repeal of the "death tax" has been cast, incredibly, as a populist issue. Thanks to sustained, lavishly financed propaganda — of which that anti-Wellstone flier was a classic example — millions of Americans imagine, wrongly, that the estate tax mainly affects small businesses and farms, and that its repeal will help ordinary people. And who pays for the propaganda? Guess. It's amazing what money can buy.
A lot depends on what you label small. It doesn't take much to get a small family farm over a million dollars in assets, or a thriving local business. The problem of "soulless corporations" taking over your downtown happens in part when family business have to sell out to larger corporations in order to pay for the estate taxes. The bigger mom-and-pops can't become brothers-and-sisters that way. If a company is owned by a small set of people, the owners are more responsive and generally more generous to the community than a more widely-held corporation. The large local businesses thus become just another cog in corporate American rather than a neighbor than can be hit upon as a soft touch for the high school booster club or the church food bank. Estate taxes don't hurt Home Depot, but they do hurt Smith's Hardware. The don't hurt Rite Aid or CVS, but they do hurt Community Drug. They don't hurt Wal-Mart, but they do hurt Pat's Supermarket. The estate tax reinforces the move towards big corporations rather than towards smaller, more socially responsive businesses. Is that what the left wants? Possibly. Smaller businesses are less unionized. The management of smaller businesses is more politically and culturally conservative and thus more resistant to "progressive" efforts. Bigger businesses make it easier to implement government regulations, for many programs have special small-business provisions. Many big corporations are allies of the left to keep small businesses shackled with regulations. It wasn't the big-business NAB that raised holy hell over the Clinton health-care plan, it was the small-business based NFIB who lead the charge. Since most of the NAB members have health insurance for their workers already, the Clinton mandatory-coverage plan didn't seem that bad, especially if it raised the costs of their smaller, less-unionized competitors. Could our modern day liberals want to get the kulaks out of the way so that they can deal with just big businesses? Discuss amongst yourselves.

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