David Runciman, in the London Review of Books (6-2-05):

The politics of taxation can sometimes be gripping for a nation’s citizens, but not often: the arguments tend to be too technical when they are true, and too obviously bogus when they are false, to sustain public interest for long. By extension, the politics of another country’s tax system is unlikely to be of much interest to anyone with any sort of normal life. Listening to the ins and outs of other people’s fiscal battles can be like listening to other people’s dreams: interminable and almost completely unreal. Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth by Michael Graetz and Ian Shapiro is something different. It tells the story of the campaign to repeal the estate tax (what we would call inheritance tax) in the United States, which culminated in the inclusion of the measure in George Bush’s massive tax-cutting legislation of 2001. Don’t let that put you off. This is one of the most interesting books about politics, and power, and the way the world is going, that you are ever likely to read.

What makes it so fascinating is that it is a mystery story. The mystery is this: how did the repeal of a tax that applies only to the richest 2 per cent of American families become a cause so popular and so powerful that it steamrollered all the opposition placed in its way? The estate tax was the most progressive part of the American tax system, because it rested on the principle that the wealthy few, if they were not willing to bequeath their money to charity, should not be permitted to pass it all directly to their heirs. It had been on the statute book for nearly a hundred years, and throughout that time it had been generally assumed that there was widespread support for the idea that unearned wealth passed between the generations, creating pockets of aristocratic privilege, was not part of the American dream. Because it was a tax that so obviously took from the relatively few to relieve the burden on the very many, there seemed no possibility that a sufficiently large or durable coalition of interests could ever be formed to get rid of it. Yet during the 1990s just such a coalition came into being, and not only did it hold together, it grew to the point where the clamour for estate tax repeal seemed irresistible. What Graetz and Shapiro want to know is how the architects of repeal got so many different people on board. How they stopped them falling out among themselves, once it became clear that they could not possibly have the same interests in common. And why the hell the Democratic Party didn’t do more to stop them.

The repeal lobby built its campaign around two forms of politics, one all too familiar, the other daringly new. The familiar tactic was to play on the sense many people have that the rich are not after all so different from the rest, if only because they hope one day to become rich themselves. A poll conducted by Time/CNN on the estate tax issue in 2000 revealed that 39 per cent of Americans believe that they are either in the wealthiest 1 per cent or will be there ‘soon’. Armed with this sort of polling evidence, the pro-repeal activists spread their net as wide as possible in looking for individuals who felt that the estate tax was going to be picking on them before too long. But as well as preying on people’s naive hopes and fears, the case for ending the taxation of inherited wealth also rested on a more surprising claim: that the estate tax was, however you looked at it, simply ‘unfair’. Whether or not the tax was likely to apply to you, the argument went, it should be obvious on basic grounds of equity that it shouldn’t apply to anyone.

As Graetz and Shapiro point out, the politics of taxation in the United States has traditionally relied on a relatively straightforward choice. Policies that allow individuals to hold onto their money and do with it what they like may be economically efficient, but they are not particularly fair: many people will end up with less than they need and perhaps than they deserve. Progressive taxes, which are more equitable, are nevertheless not so efficient at generating future wealth. You can’t have it both ways. But both ways was exactly how the opponents of the estate tax did have it. As well as attacking the tax on the grounds that it stifled wealth creation, they also attacked it on the grounds that it was unjust in principle. This brazen – and from the outside baffling – proposition rested on three elements, which taken together turned the traditional logic of tax politics on its head.

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