In early April, a group of prominent African-American businessmen led by Black Entertainment Television mogul Robert Johnson ran a full-page advertisement in The New York Times and The Washington Post calling for an end to the estate tax. What was notable about the ad wasn't its message--the movement to repeal the estate tax has been building for some time--but who was paying for it. As a group, African Americans--traditionally Democrats--are not who you'd expect to see agitating to abolish a tax that affects only the wealthiest Americans.
Johnson's ad repeated the arguments estate-tax opponents commonly employ to sway public opinion to their side: The tax hurts small businesses and farmers; it represents a "double tax" on wealth; and it is levied "simply because you die." Each of these points is misleading and easily refuted [see "Meet Mr. Death" and "The Estate Tax as Robin Hood?" TAP, May 21, 2001]. But Johnson's group added a new argument: The estate tax discriminates against African Americans. The estate tax, the ad claimed, "will cause many of the more than one million black-owned businesses to fail or be sold"; will add the insult of a burdensome tax to the injury of discriminatory policies that make it harder for blacks to get loans; and will unfairly penalize newly wealthy blacks. Killing the estate tax, the ad said, will help close the wealth gap between blacks and whites.
The ad generated considerable news coverage--none of which pointed out that its claims are blatantly, egregiously false. Let's examine each of the falsehoods in turn.
Falsehood 1: Repealing the estate tax would help blacks close the wealth gap. This is preposterous. Estate-tax repeal would blow the gap wide open. Only the richest 2 percent of Americans pay the tax--and this group is white by a margin of more than 10 to one. So eliminating the tax (estimated to cost $662 billion over 10 years) would amount to an enormous tax cut for the wealthiest Americans, few of whom are black. Moreover, to recoup the revenue shortfall that would result from estate-tax repeal, the government would have to shift the tax burden to other Americans, causing many more blacks (and whites) to be hit with a new tax. Thus, eliminating the estate tax would likely raise taxes for most blacks.
Falsehood 2: Blacks who pay the estate tax suffer more than whites who pay it. The tax is levied on wealth, not on race. But Johnson insists that "old wealth" is easier to protect than "new wealth," the category into which most rich African Americans fall. This may have been true a century ago. The Rockefellers, the Vanderbilts, and other "old money" families who've been rich for generations didn't have to pay the estate tax (which, in its modern incarnation, was instituted in 1916) when they bequeathed assets to their heirs. Today, by contrast, a family of black robber barons would be taxed when they passed on their estate. But so would any wealthy family--be it the Rockefellers or the Johnsons--regardless of race or family history.
Worse, Johnson and other pro-repeal business owners rely on uncomfortable racial stereotypes to make their case that blacks suffer the effects of the estate tax more than whites. One common refrain is that wealthy whites avoid the tax through legal maneuverings that blacks are somehow incapable of emulating. "They've already got their money set up in offshore accounts, they've got their little tax shelters" complains Harry Alford, Jr., the president, CEO, and co-founder of the National Black Chamber of Commerce. "We don't know how to play that game or can't afford a Price Waterhouse accountant to perform such a service." Besides, says Alford, "We've come a long way in three generations, and for the government that started this mess of slavery to turn around and take 60 percent of the money we leave to our kids, it isn't just taking money away, it's knocking out a legacy."
Falsehood 3: The estate tax will especially hurt African-American small businesses and farmers. …