Outgoing US Sen. Phil Gramm, R-Texas, was furious when the Senate failed this week to enact his pet project: permanent repeal of the federal estate tax.
“This will be a campaign issue,” grumbled Gramm, who decided not to seek reelection as it became clear that his ties to Enron and other crumbling energy concerns were no longer a political asset.
Despite his lame-duck status, Gramm still likes to offer political advice, especially when it comes to lowering taxes for wealthy campaign contributors. And he is not alone. White House political strategist Karl Rove — who is paid with taxpayer dollars to run George W. Bush’s continuous campaign — told business owners after the vote: “Don’t look at it as a defeat. This is a war, and we need to make an ongoing commitment to winning the effort to repeal the death tax.”
Progressives can only hope that conservative candidates will, on the advice of Texans Gramm and Rove, try to make an issue of the Senate’s failure to shift even more of the federal tax burden onto the shoulders of working Americans. Cutting the estate tax is neither smart policy, nor smart politics. (A Greenberg/Quinlan/Rosner survey found in May that of all possible tax “reforms,” repeal of inheritance taxes is the one least favored by voters — the most popular, a tax cut targeted to low- and moderate-income Americans, was favored by a 6-1 margin over estate tax repeal. If Congress must tinker with the estate tax, the survey found that, by a 58-37 margin, voters favor reform over repeal.)
That may explain why three Democrats who are up for reelection this year shifted from support last year for Bush’s tax cut plan — which included a temporary repeal of the estate tax — to opposition this week to permanent repeal of the tax.
Yet, it was not just political realism that caused the Senate to stop a high-profile bid by the Bush White House and Republican leaders in the House and Senate to dramatically cut taxes for the richest 2 percent of Americans. Nor did the vote go the way it did because the majority of Senate Democrats got a sudden jolt of courage in the face of pressure from business groups — and wealthy families, including the heirs to the Mars candy and Gallo wine fortunes — that have lobbied hard for a decade to eliminate what conservatives dub “the death tax.”
The bid to permanently repeal the estate tax was undone over many months by activists who effectively delivered the message that permanent repeal would cost an already strained US treasury billions of dollars, causing a revenue gap that would have to be addressed either by cutting necessary programs or raising taxes on low- and middle-income Americans. (Permanent repeal would have cost $55 billion in tax revenues in 2011 — the first year of a long-term repeal — and $800 billion over the years 2012 to 2021.)