Rescue act

A huge gift to the wealthy heirs

Senatorial Minority Leader Mitch McConnell hears the grief of the wealthy heirs.
Photo: Stefani Reynolds / Bloomberg via Getty Images

Last month, Senator Ted Cruz appeared on CPAC and declared that their party had become the genuine representative of the proletariat. “The Republican Party is not the party of country clubs,” he boasted, “it is the party of steelworkers and construction workers, taxi drivers, cops, firefighters and waitresses” . Republicans have been saying things like this for many years, but with particular emphasis since Donald Trump became their standard bearer.

Oddly enough, many non-Republican observers have made similar suggestions. There’s a reason the kind of reporting of interviewing Trump’s voters is called “dinner journalism” rather than “country club journalism.” Matt Karp, writing in Jacobin last month claimed that the election was characterized by “a party system entirely decoupled from class politics … with Republicans winning larger and larger chunks of the unqualified working class, while Democrats getting more and more in addition to voices from well-to-do professionals and managers. . “The left-wing version may not credit Republicans for advancing the cause of the working class, but it denies that Democrats are defending important class interests.

And yet, the Biden administration is already refuting these claims. Among other things, the American Rescue Act is a platform for a historically significant transfer of resources to the poor and the working class. The Tax Policy Center has a graph comparing the effects of the income law to Donald Trump’s signing legislation:

Graphic: Center for Fiscal Policy

Trump and his party have used their legislative majorities to redistribute income up the income scale. Biden and his party are using theirs to distribute it.

Moreover, there is no indication that the Republican Party is heading towards some sort of working class agenda. As recently as yesterday, 25 Senate Republicans introduced a bill to repeal the inheritance tax. To understand how few people would benefit from this measure, let’s start with the fact that estate tax currently completely exempts any transfer worth $ 11 million – by spouse. This means that a couple can pass over $ 22 million to their heirs tax-free, without any estate planning maneuver.

And, of course, that’s only just beginning to describe other ways to avoid taxes. The most important is the “base plus” loophole, which allows heirs to avoid any tax on capital gains accumulated before the transfer of the estate. It is not a small flaw. Among estates valued at $ 100 million or more, 55% of the value is comprised of unrealized capital gains, income that will be taxed at a rate of 0%.

The estate planning industry has countless other ways to minimize or avoid taxation. All told, the effective tax rate (that is, the percentage actually paid to the IRS) on estates is well below half of the statutory rate of 40%.

Why are Republicans so obsessed with repealing a tax paid exclusively by people who inherit huge fortunes? They think it is unfair to charge them for anything.

“The inheritance tax is perhaps the most unfair tax on the books,” says Mike Crapo, member of the finance committee. They are not making an economic argument. They make a moral argument. They are – as far as I know – truly disgusted with the burden faced by people who inherit vast reserves of wealth.

It is true that political rhetoric does not focus much on the class implications of partisan voting decisions. It is also true that partisanship has become less polarized by income than before and more polarized by education and race.

But even if the class does not divide parties properly by their voters, it does divide them by their agendas. The Republican Party’s agenda centers on protecting the after-tax income of the very rich. The Democratic Party’s agenda is focused on increasing after-tax income for the bottom half of the income distribution.

Republicans love to say it is a workers’ party because “We are the party of the people who inherit estates exceeding $ 23 million” is not a very attractive slogan. But the rest of us don’t have to repeat their propaganda.