Tax Analysts Blog

Face It: Americans Just Don’t Like the Estate Tax

Posted on Mar 24, 2016
I’m of two minds about the estate tax. One the one hand, I think liberals should double down in defense of this, the most progressive of federal taxes. If the left can’t win this fight, in this environment — rising inequality, stagnant wages, populist politics — they might as well close up shop entirely.

On the other hand, I’m plagued by the suspicion that the estate tax is a lost cause. The levy has been around for a long time -- it will turn 100 later this year — and conventional wisdom tells us that an old tax is a good tax. But the estate tax is not a good tax, at least not in the judgment of most Americans. It's been notoriously unpopular for decades, and a recent Gallup poll found that 54 percent of us want to repeal it entirely.

It’s hard to explain all the antipathy, at least in terms of taxpayer self-interest. The estate tax applies to only the most fortunate few – just two of every 1,000 estates actually owe anything.

Other poll results suggest that Americans may understand this. Asked in a 2007 New Models National Brand Poll to identify the current tax that concerned them the most, 29 percent said the property tax. Another 28 percent called out the federal income tax. Just 3 percent said the estate tax was their chief concern.

Those numbers have sent liberals in search of an explanation. Once upon a time, way back in the 1990s, it seemed reasonable to blame the tax’s flagging popularity on a deep-pocketed, highly skilled Republican campaign to destroy it. But now, two decades later, that explanation seems inadequate. If Americans were fooled into disliking the estate tax, they were fooled pretty thoroughly— and more or less permanently.

At what point do liberals need to consider the possibility that something besides ignorance and stupidity is necessary to explain the popular distaste for the estate tax?

Maybe never. Some research suggests that liberals have been right all along. In a recent study published by the American Economic Review, economists found that providing data on the (small) number of estates paying the tax produced a significant boost in support for the levy. A little information can go a long way.

But that answer – while comforting for anyone hoping to save the tax – doesn’t really satisfy. The main thrust of the AER study actually points in the opposite direction: Generally speaking, policy preferences are not responsive to new information. According to the article, the estate tax is an exception, but the broader finding raises doubts (at least in my mind) about the efficacy of public information campaigns.

Plus, it’s not like liberals have been silent about the estate tax all these years. Its champions have been relentless in their attempt to rescue the tax, emphasizing its narrow scope and progressive utility,but to little avail; the tax remains broadly unpopular.

I think liberals need to consider a different explanation— albeit a less encouraging one. In his 2013 book, Tax Fairness and Folk Justice, economist Steven Sheffrin takes a long, hard look at the estate tax. And he emerges with a somewhat different explanation for its flagging political fortunes.

The estate tax is only a puzzle when we assume that redistribution is the only thing that matters to voters, Sheffrin suggests. In fact, Americans consider other issues when they think about taxing inherited wealth. Sheffrin organizes those issues under the rubric of "folk justice," which he defines as "the full constellation of attitudes that individuals hold in their daily lives about all dimensions of justice."

In trying to explain opinions of the estate tax, Sheffrin employs the concept of moral mandates: broad, nonnegotiable conceptions of right and wrong that are largely impervious to logical argument either for or against. One moral mandate in particular seems to have fostered opposition to the estate tax: its association with death, which taps notions of grief and family responsibility. In that sense, the GOP's famous rebranding of the estate levy as a "death tax" was brilliant.

A second moral mandate concerns the notion of double taxation, which strikes many Americans as simply wrong, regardless of whether it's actually unique to the estate tax (or actually going on with the estate tax in the first place). Sheffrin cites poll data to suggest that double taxation arguments were crucial to mobilizing opposition to the estate tax.

Fans of the estate tax no doubt object that both of those moral mandates trade on popular misconceptions about the estate tax. The tax is not a tax on death but on the transfer of assets, they say. Likewise, many assets snared by the estate tax have never been taxed even once, let alone twice.

These are reasonable objections. (I don't think it's crazy, however, to describe a tax by the event that triggers it; without a death, no one pays any estate tax. That's why "death tax" was a common -- and apolitical -- usage among tax experts as far back as the 1930s.) But saying that moral mandates are wrong does not address the fact that they are real enough to voters. And a failure to treat moral mandates with some degree of respect helps explain why estate tax supporters have done such a miserable job of selling their argument to the public.

Sheffrin also suggests that a second element of folk justice has also been pivotal in the estate tax debate. "System justification theory" can help explain why Americans oppose a tax that they believe might pose a threat to the status quo, he argues. That theory posits that even if people don't like elements of the current system, they will still defend it against challenges and threats.

In the context of the estate tax debate, system justification theory suggests that many people oppose the levy as "a system threat to the social status quo of the family." It matters not that the families in question are disproportionately wealthy; a rich family is still a family, and any tax that threatens a family is unjust. That element of system justification theory resonates with moral mandates about the family, too, making for a powerful avenue of attack against the estate tax.

The estate tax can also seem like a threat to American traditions of meritocracy and hard work. To the extent that many Americans are vested in the proposition that hard work can produce meaningful rewards, any tax that threatens to limit those rewards can seem unfair and, on some level, even immoral.

Again, supporters of the estate tax see a lot of misinformation at work here. In particular, they object that the vast majority of people can work hard, accumulate wealth, and still remain free of the estate tax when they die. But that sort of argument is self-defeating from a moral perspective. "Don't worry about this immoral tax," it seems to say. "You won't be among the poor souls who have to pay it." On a self-interested level, that may be a comfort. But it's not exactly a strong claim to the moral high ground.

Ultimately, the point I take from Sheffrin's discussion of the estate tax is about the political perils of judgmentalism. In trying to make sense of the estate tax and its unpopularity, supporters of the tax might be better served by trying to understand popular attitudes rather than simply correct them.

Read Comments (3)

Carson StuartApr 10, 2016

Joseph, thank you for your analysis of American responses to the current estate
tax. What do you think about changing the timing of the estate tax levy from
when the taxpayer dies to an annual payment, i.e, an Annual Estate Tax?

Eugene Patrick DevanyApr 24, 2016

Better tax reform can allow individuals to focus assets in ways that promote
business, recognize individual and family needs at different stages in life and
offer incentives to those who pay a fair share.

For individuals, Estate Taxes (perhaps set at a flat 28%) could enable other
tax rates to be lower during life – a good thing for all, including the
wealthy. Tax exemptions can encourage savings for family needs such as
education, hospital care and retirement. Now imagine the dynamic incentives of
a choose-your-own income tax rate ranging from 8% to 28% with each rate paired
with a decreasing net wealth tax ranging from 2% down to zero. Middle class
success could be encouraged by permitting each taxpayer to save up to $500,000
exempt of wealth taxes for long term family needs. If Estate and Gift taxes
were offset by wealth taxes paid, all individuals would want to pay some wealth
taxes to both lower income tax rates and to reduce Estate taxes. Even with no
payroll tax, Social Security benefits would remain adjusted for lifetime
earnings. Tax avoidance can be turned upside down.

Next consider business tax reform with a C corporation income tax rate of just
8%, a low 4% VAT and no wealth or payroll taxes. The modest rates enable
businesses to compete globally and the absence of wealth and payroll taxes help
to insure that businesses have all the physical and human assets needed to
thrive.

Donald Trump was at the other extreme when in 2000 he proposed a 14.25%
one-time wealth tax to pay the national debt if congress would only eliminate
the Estate Tax.

Ed DMay 18, 2016

Most people have no idea how the "death tax" works. I blame the widespread
ignorance on Roger Ailes and Rush and the gang. Nobody pays it anyway because
of the way you can structure trusts. Maybe the Democrats should give this up
in return for progressive payroll taxes.

Submit comment

Tax Analysts reserves the right to approve or reject any comments received here. Only comments of a substantive nature will be posted online.

By submitting this form, you accept our privacy policy.

* REQUIRED FIELD

All views expressed on these blogs are those of their individual authors and do not necessarily represent the views of Tax Analysts. Further, Tax Analysts makes no representation concerning the views expressed and does not guarantee the source, originality, accuracy, completeness or reliability of any statement, fact, information, data, finding, interpretation, or opinion presented. Tax Analysts particularly makes no representation concerning anything found on external links connected to this site.