There’s a saying that applies to the most vociferous political opponents of the estate tax: Some people are born on third base and go through life thinking they hit a triple.
Every four years, Republican presidential candidates engage in a symbolic ritual of estate tax batting practice. Like George W. Bush and Mitt Romney of years past, Donald Trump is no different.
“No family will have to pay the death tax,” Trump said in Detroit. “We will repeal it.”
It’s telling that the candidates who campaign on a platform of repealing the estate tax grew up in wealthy families.
In fact, we shouldn’t repeal a tax that President Theodore Roosevelt advocated as a brake on the dangerous concentration of wealth and power. The estate tax is the only levy that America’s richest citizens will pay as they pass on great wealth to their heirs. Over the next decade, it will raise an estimated $270 billion, funds that can be invested in education and infrastructure to expand the wealth-building opportunities for the well-to-do and everyone else.
The tax on inheritances is limited — fewer than 2 in 1,000 estates is large enough to be subject to it. It isn’t a death tax: It targets a transfer of wealth, income or property, just as most federal taxes do. Nor is it a double tax: The bulk of the wealth subject to estate taxes is in appreciated capital assets and has never been subject to any tax.
It’s telling that the candidates who campaign on a platform of repealing the estate tax grew up in wealthy families where just such appreciated assets have made the tax a personal issue. Yet they cast themselves as examples of individual deservedness and success, everyday people who worked hard, paid their taxes and want to pass their already-taxed wealth on to their children.
In 2000, George W. Bush campaigned for elimination of the estate tax in his first 100 days in office. His family’s millions and political networks put him in a position to find investors for forays in the Texas oil fields and major league baseball. Bush credits his family name and connections but mostly ascribes his wealth and success to personal “results and performance.”
In 2012, Mitt Romney, son of George Romney, the former chief executive of American Motors and former governor of Michigan, also pressed for estate tax repeal. On the campaign trail, Mitt Romney told donors in Florida that he had “inherited nothing.” “Everything that Ann and I have we earned the old-fashioned way, and that’s by hard work.”
Yet Ann Romney once inadvertently revealed how important family wealth was to the couple. She described their college years together as financially difficult: “Neither one of us had a job, because Mitt had enough of an investment from stock that we could sell off a little at a time.” She elaborated, “The stock came from Mitt’s father.”
In recent years, Romney has used an elaborate estate tax dodge called an Intentionally Defective Grantor Trust to make gifts of an estimated $100 million to his heirs, tax free.
Trump frequently tells his business success story but omits his gilded path to gold. Thanks to his real estate developer father, Trump not only inherited an empire valued at $40 million to $200 million, he also received valuable business training, connections and a starter loan.
I was also born on third base — I’m the great-grandson of Oscar Mayer. I understand the temptation to emphasize merit over inheritance. No one wants to go through life confessing to getting a free ride or a massive head start.
Neither I nor Bush, nor Romney nor Trump can alter the circumstances of our birth or the families we are born into. And no apologies are required from third basers either. However, it’s disingenuous when candidates omit a privileged start from their personal biographies. Growing up in a privileged family is a tremendous advantage, and if we don’t admit it, it leads to a false judgment: “Why can’t you be like me and gain wealth by working hard?”
Voters shouldn’t be taken in by these everyman stories anymore than by the fictions that are spun about the estate tax.
No one who depends on a paycheck for survival will pay an estate tax. The average inheritance in the U.S. is $177,000; the estate tax kicks in for a couple at $10.9 million. And the estate tax captures a portion of the appreciated value of investments, businesses, land and housing as they pass to heirs. These increased capital gains have never been taxed, like a $1,000 share of Berkshire Hathaway stock purchased in 1983 that is now worth millions.
Of course, individual effort contributed to the wealth of Trump, Romney and Bush, which is what allows them to put a self-made spin on their personal narratives. But as Seagrams heir Edgar Bronfman has humbly admitted, “To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.”
Bronfman may have influenced Libertarian Party vice presidential candidate William Weld. When asked about his inherited advantages, Weld puckishly responded, “The Welds don’t make money; they have money.” One has to admire honesty like that.
Chuck Collins is a senior scholar at the Institute for Policy Studies, where he co-edits the website Inequality.org. He is author of the forthcoming book “Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good.”