So, a Treasury secretary, a labor union leader, a hedge-fund billionaire, and an heiress walk into a conference call.
It's not a Catskills joke. It was the teleconference staged Wednesday morning by United for a Fair Economy's Responsible Wealth Project to discuss the need to reinstate the estate tax. The situation surrounding the estate tax is truly bizarre. The excellent book Death by a Thousand Cuts, by Michael Graetz and Ian Shapiro, describes how a tax that falls on the slimmest minority of Americans was set on the path to extinction in 2001. Legislation called for the tax to decline to the point at which it disappears entirely in 2010. Then it would bounce back to its pre-2001 level in 2011. The Republican advocates of the legislation assumed that Congress would act in the interim to permanently abolish the tax. But they didn't, in large measure because—shocker!— Republicans in 2009 refused to cooperate on a compromise. And so 2010 is turning into an excellent time for rich people to die. Sens. Jon Kyl, R-Ariz., and Blanche Lincoln, D-Ark., are working on a proposal to reduce estate taxes going forward. (They are an odd pair: The number of Arkansans subject to the estate tax each year could fit into the master bathroom of a Greenwich, Conn., mansion, and Kyl is one of those foolish deficit faux-hawks who can't abide increases in debt but is happy to push legislation that would increase the deficit by a few hundred billion dollars.)
The purpose of the press conference was to show that abolishing the estate tax massively increases the deficit in order to help a few very wealthy people. Former Treasury secretary and former Citi chairman Robert Rubin opened the call, playing the role of the wise establishmentarian. He argued that the current deficits are unsustainable, and public investments in infrastructure and education are necessary to keep America strong. "Our country faces tremendous unemployment and shortfalls in investment, and we have a fiscal path that is unsustainable and dangerous in many different respects," he said. And since the estate tax "supplies revenues with no adverse supply-side effects," the proceeds could be used for deficit reduction, for public investments, or to help people afflicted by the economic crisis.
Second on the call was the union leader. You know the type: barrel-chested, tough-talking, confrontational, very much into class warfare. In the union leader's worldview, the top 1 percent have been bogarting all the economic gains for the past few decades. Richard Trumka, president of the AFL-CIO, appealed not just to reason, but to emotion. He started by reading a quote from Theodore Roosevelt about the evils of inherited wealth. Speaking with disdain of the Kyl-Lincoln proposal, he said, "We think it's ludicrous that some in Congress are proposing to end the estate tax at the same time they oppose action to create jobs. Anyone who pretends to care about cutting deficits while opposing reinstatement of estate tax is clearly residing on a different planet than working people."
Trumka was followed by the hedge fund magnate, one of those self-made, public-minded billionaires who can be found here and there in the tech and financial industries. These guys are acutely aware of the differences between people who make money (them) and people who receive it (rich kids), between the multipliers (them) and the spenders (rich kids). To Julian Robertson, the founder of hedge fund giant Tiger Management and a major philanthropist, the economic and moral case for an estate tax increase was simple. "You get out of a credit crisis by getting your house in order, and in America's case bringing your deficit down. This implies tax increases." The fairest way to do it, he said, is to tax "the least deserving recipients of wealth, which are the inheritors." The tax is not just good for America, he said, but even for the heirs and heiresses. Robertson noted that "there are indicators that inheritors have difficulty adjusting to their inheritance." (I guess he watches Gossip Girl too.)
Finally came the inheritor, on whom the mantle of great inherited wealth frequently weighs heavily. Heirs who favor an estate tax are motivated less by liberal guilt than by unease, realism, and historical perspective. They've seen how their families amassed, preserved, and passed down wealth in spite of income and estate taxes that were far higher than they are today. "My life of great comfort was made possible in spite of the estate tax," said Abigail Disney, the grandniece of Walt Disney, a filmmaker and philanthropist. "And my grandfather [Roy Disney, brother of Walt] would be the first to tell you that he was able to amass his fortune not in spite of, but because of, the American system."—the roads that enabled people to get to Disneyland, the patents that protected Mickey Mouse and Donald Duck, and the Marshall Plan, which helped provide a vast European market for the company. Heirs know that while charity has its own rewards, the estate tax and charitable deductions provide huge spurs to philanthropy.
Coming from far different places, the quartet arrived at the same destination. In an era of rampant inequality, low taxes on owners of assets and capital, and record deficits, the estate tax's impending revival couldn't come at a better time.