As part of its continuing campaign against repeal of the estate tax, the New York Times today devotes enormous, above-the-fold front-page play to an article that runs under the headline "States Expecting to Lose Billions From Repeal of U.S. Estate Tax." The article estimates the states' loss in tax revenue resulting from repeal of the estate tax at $50 billion to $100 billion over ten years. Those estimates seem in the ballpark when you consider that the article reports that states collected $7.5 billion in estate and inheritance tax revenue in 1999.
But wait a minute. Remember back to an earlier stage in the Times campaign against repeal of the estate tax: the stage during which the newspaper was trying to persuade readers that the repeal of the estate tax would have a devastating effect on the nation's charities. For instance, in a February 3, 2001, editorial titled "Estate Tax Folly," the Times warned that without the death tax, "bequests to universities and other charitable institutions could dry up." A February 10, 2001, Times news article reported, "The estate tax stimulates $14 billion a year in charitable bequests, according to an Internal Revenue Service study, money that nonprofit organizations have come to depend on." That same news article quoted Charles Collins, "director of the Responsible Wealth Project, a group of 450 business leaders and investors who favor the estate tax," who said, "Repeal would have a devastating impact on public charities ranging from higher education and health care to organizations assisting the poor and disadvantaged."
Now, think about this for a minute. According to the Times (and, supposedly, the IRS), the estate tax stimulates $14 billion a year in charitable bequests. That's money that goes to non-profit, tax-exempt organizations -- tax revenue lost to the government. If the Times is going to claim that this money only gets given because of the estate tax, then it seems only logical and consistent to assume that in the absence of the estate tax, these funds would remain in private hands -- and would be subject to taxation. If the money is spent rather than donated, the states will make money on sales taxes. If the money is invested, the states that tax dividend and interest income or capital gains will make money that way. But it's just alarmist and inconsistent to look at the effect on the states of estate tax repeal by simply zeroing out the estate tax revenue and not looking at any of the other, offsetting economic effects of the tax change. Especially when the Times had been making the argument so vigorously elsewhere about the effect of estate tax repeal on charitable donations.
Now, one could argue that the decline in charitable donations will create a need for additional state spending to provide the services that had been provided by charities. Or could argue that the effect of the estate tax repeal on charitable donations is being wildly overestimated. Or one could argue that the taxes on the $14 billion a year that will remain in private hands because of estate tax repeal still won't be enough to make up for the revenue the states will lose as a result of estate tax repeal. But failing even to mention the potential offset makes it look like the New York Times isn't interested in a genuine assessment of the costs and benefits of repealing the tax, but is rather interested in campaigning against the repeal.
More on Taxes: A New York Times/CBS News Poll reported in today's New York Times asked, "Was using a significant portion of the budget surplus to cut taxes the best thing to do, or would it have been better to spend the money on programs like Social Security and Medicare"? This question is utterly inconsistent with the Times's own logic, which insists that Social Security and Medicare are paid for by payroll taxes and lockboxes and trust funds and are not part of the general budget pool out of which the Bush income-tax cuts are a part. Medicare and Social Security are extremely popular programs. The Times could have asked, "Was using a significant portion of the budget surplus to cut taxes the best thing to do, or would it have been better to spend the money on public works projects in the districts of powerful members of the House Appropriations Committee?" Or it could have asked a general question about taxes versus spending, rather than specifying that the spending would be on two particularly popular and broad-based programs that, by the Times's accounting, aren't funded out of the main budget pool anyway. Now, you can make the Krugmanesque claim that the Bush tax cuts in the end will require raiding the Medicare "lock box," but even the most pessimistic budget analysts, even the Senate Democrats, acknowledge that most of the tax cuts are "funded" from surplus dollars that have nothing to do with Social Security or Medicare. Again, it looks like what's going on is that the Times isn't interested in genuinely measuring public opinion, but in campaigning against a tax cut.