(Bloomberg View) — One has to marvel at the politics of the estate tax. I generally believe that people don’t care about taxes, as long as someone else is paying them. The estate tax defies that belief. I also generally believe that policies with negligible cost and negligible benefit — especially those that affect almost no one — are unlikely to stir the hearts of the electorate. Which is true. Except for the estate tax.
Why does it get people fired up?
For political points. Democrats spend a great deal of time fulminating about a tax that raises roughly no revenue for the Treasury. This is not the only such inconsequential policy they care about, mind you; President Obama’s obsession with changing the depreciation schedule for corporate jets springs readily to mind. But Obama is a politician, and politicians are always happy when they can find some complete nonissue that sounds like “tax breaks for corporate jets” and prate about it on the stump to an electorate that doesn’t know fancy words like “depreciation schedule” and isn’t going to bother to learn them. Even leftish policy wonks sort of roll their eyes at the sordid necessities of politics, and move on to more important matters. But not with the estate tax. About the estate tax, left-wing wonks care.
Then you have the Republicans. I understand why Republicans are so gung ho to get rid of the estate tax: Simply put, very rich people will donate a lot of money to campaigns that suggest their children ought to be able to inherit their wealth tax-free. What is astonishing to me is how successfully Republicans have been able to rebrand the estate tax as the “death tax,” and persuade 71% of voters that inheritance taxes are unfair. Now, if the estate tax were actually widely paid, and stood in the way of ordinary Americans inheriting Grandma’s mint-condition 1984 Cadillac Eldorado, this would not be at all surprising. But only a tiny percentage of estates pay the tax, because you get to pass on more than $5 million tax-free before the government takes a dime (more for couples).
Another mystery: Why do Democratic policy wonks care whether the right abolishes the tax?
In fact, there are reasons to keep the estate tax around. Let’s start with some basic moral observations: Once you are dead, you no longer have a voting interest in what goes on in society. Thus, your interest in how your assets get disposed of after you’re no longer using them is minimal. While you’re alive, I’ll defend your property rights vigorously. Once you have died, however, you lose my support.