In the glow after last fall’s election victory, Grover Norquist, ringmaster for the right’s tax-cutting circus, mischievously compared minority Democrats in Congress to a bunch of neutered farm animals. Once snipped, he said, they can be counted on to accept comfortably “the finality of their powerlessness.” Norquist often employs such tasteless metaphors. He also often gets the politics right.
At this moment, Senate Democrats are preparing to take a dive on the issue they have righteously hammered for four years–repeal of the estate tax–and they intend to call this “victory.” The Dems want to negotiate a “compromise” with Senate Republicans that will restore the inheritance tax while reducing the rate at which estates are taxed and exempting many more families who are rich but not extremely rich. Yet the outlines of what Democrats are pursuing looks like a monstrous giveaway. It would yield roughly $420 billion in tax relief for the very wealthiest families. Indeed, the bipartisan bargaining may wind up producing far greater revenue losses. When wobbly-kneed Democrats set out to negotiate with hard-nosed Republicans on taxes, the Republic is very likely the loser.
This cave-in would make a joke of Democrats’ fervent demands for fiscal responsibility and balanced budgets. Forget all their rants about growing income inequality and shameful Republican tax cuts for the rich. The “reform” proposal circulating among Dems would surrender 55 percent of the estate-tax revenue that would otherwise be gained by the government. This windfall would go to something like 160,000 families and leave a huge hole in the federal tax base. Some victory.
The maneuvering illustrates, once again, the defeatist mentality of the party establishment. Always eager to avoid a fight on matters of conviction, the Dems’ one inflexible principle is incumbent self-protection. Senate minority leader Harry Reid wants to get the estate-tax issue settled before next year’s elections so the GOP can’t use it to club two or three vulnerable Democrats as “tax and spend liberals.” So Reid deputized Charles Schumer of New York to lead the negotiations with Senate Republicans. Schumer chairs the Democrats’ Senate campaign committee and is thus the guy who makes nice to the wealthy contributors. They are the only people who pay this tax.
Oddly enough, though they are in the minority, Senate Democrats should have the high ground on this issue. If they unite to block any further action by Republicans, the original estate tax will automatically come back into full effect in 2011. Bush’s massive tax-cutting bill in 2001 dramatized this long-established provision as the “death tax” and further confused the public about the impact repeal would have on government programs. Bush’s too-cute concoction provided that the estate tax was to be slowly reduced but not repealed in full until 2010. To conceal the true long-term revenue losses–approaching $1 trillion–the legislation was then designed to expire in 2011. So essentially the repeal has to be enacted again to become permanent. The House Republicans have already done so.