Republicans have again picked up the fight against inheritance taxes, and they have the public on their side. Democrats, on the other hand, have an important industry behind them.
The House on Thursday passed a bill that would totally repeal the estate tax, also known as the death tax. The Senate already passed an amendment doing this same thing during the the budget debate. President Obama on Tuesday promised to veto repeal, saying it would “add hundreds of billions of dollars to the deficit to provide large tax cuts exclusively to the very wealthiest Americans.”
Obama wants to go in the opposite direction: His 2014 budget called for increasing the estate tax rate to 45 percent and lowering the exemption to $3.5 million. Again, he pitches this as a story of the wealthy versus average taxpayers. But if you peek behind the curtain of populist rhetoric, you see plenty of big money, heavy lobbying, and hypocrisy on the side of the death-taxers.
Consistently, about two-thirds of Americans tell pollsters that they oppose the death tax. The Family Business Coalition has brought together dozens of groups this year to advocate repeal of the death tax, groups as widely diverse as the National Council of Farm Cooperatives, the National Black Chamber of Commerce, and the Association for Hose and Accessories Distribution.
These groups represent business owners who, if they have enough success, will be subject to the death tax. The tax could force heirs to liquidate the family business in order to pay the tax bill. This unfairness is a major reason most Americans dislike the death tax, even though very few will ever pay it.
But some segments of the population feel differently — most notably, the estate-planning industry. A survey by an industry magazine in 2011 found that 63 percent of estate-planning attorneys opposed repeal of the estate tax.
That’s fitting. The death tax forces people to engage in complex and expensive estate planning.
Lobbying disclosure forms show that the insurance industry is lobbying on the issue these days. The Association for Advanced Life Underwriting, which represents companies that sell estate-planning products, lobbied on the issue last year, as it has for years. Last decade, AALU funded a group called the Coalition for America’s Priorities, which attacked estate tax repeal as a tax break for Paris Hilton.
AALU’s pro-death-tax lobbying team includes the K Street firm Ricchetti Incorporated, co-founded by Steve Ricchetti, who has served in the inner circles of the Clinton and Obama administrations.
Everywhere you look in the fight to save the death tax, you see the fingerprints of the estate planners. Last decade, one of the champions of the death tax was Sen. Byron Dorgan, D-N.D. During Republican attempts at repeal in 2005, Dorgan said “the purpose of this issue is to say to the richest, the wealthiest Americans, we want to help you.”
Interestingly, Dorgan was a wealthy person at the time, largely because of his wife’s job as top lobbyist for the American Council of Life Insurers, a longtime champion of the death tax.
When the estate tax was last before Congress, the life insurance industry revved up the troops, spending $10 million a month on lobbying in the first half of 2010. In that stretch, only three industries spent more, according to data from the Center for Responsive Politics.
Hillary Clinton, the early favorite for the 2016 Democratic presidential nomination, has voted and spoken in favor of a higher estate tax rate and lower exemption. She is a multimillionaire, thanks mostly to the very expensive speeches she and her husband give to corporations. Some estimates put the Clintons’ net worth at more than $50 million.
The Clintons may be stupid-rich, but they aren’t stupid — they’re using estate-planning techniques to avoid the estate tax. Bloomberg News reported in 2014 that the Clinton family home has been divided, for tax purposes, into two shares, and those shares have been placed in a special trust that will shield Chelsea from having to pay the estate tax on the full value of the home when she inherits it. Also, the Clintons have created a life insurance trust — a common tool wealthy people use to provide liquidity for heirs to pay the estate tax.
The Clintons’ games, and the estate-planning industry’s interest in the tax, highlights how the tax fails at its stated aims of preventing the inheritance of wealth and privilege. Instead, the estate tax forces the wealthy to play games in order to pass on their wealth. These games don’t add anything to the economy, they just enrich the estate-planning industry.
Those whose wealth is tied up in a small or medium-sized business, on the other hand, aren’t always capable of playing the estate planning games. They’re the victims of Obama’s threatened veto.
Hillary and Bill? Don’t worry about them, they’ll be fine.
Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Sunday and Wednesday on washingtonexaminer.com.
