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Article Excerpt
INTRODUCTION
We examine here the impact of public opinion on legislative outcomes in the surprising case of the repeal of the federal estate tax in 2001. This repeal benefits only a tiny minority of very wealthy Americans: those bequeathing, or inheriting from, estates larger than $1 million. Logically, one might have anticipated, as Congressional Democrats did for a long time, that such a measure would provoke a popular backlash. If enacted at all, it would be done in the dead of night or buried quietly within a larger bill. Yet, over recent years, estate tax repeal somehow acquired a populist flavor and became a high priority for mainstream as well as conservative politicians. Beginning in 2000, the House and Senate repeatedly voted to repeal the estate tax in standalone measures. (1) While, due to budgetary constraints, the actual repeal that was signed into law in June 2001 was only a temporary one-year repeal, (2) the repeated achievement of broad bipartisan support was an astonishing success for repeal advocates. As the battle for a permanent repeal persists, this measure continues to be viewed as a winning issue with the public.
Our investigation here is unorthodox in that, in addition to the usual public sources, archival research, and scholarly literature, we engaged in more than one hundred interviews, the great majority not for attribution,
with Congressmen, Senators, executive department officials, political aides, civil servants, journalists, interest group representatives, analysts and others with different stakes in the outcome. We find that public opinion is a weapon that can be deployed, more or less effectively, by interest groups struggling to shape what Congress does. Interest groups expended great effort to identify the wide-ranging contours of public opinion and used this knowledge to shape politicians' perceptions of public opinion on the issue. The first part of this paper demonstrates the extent to which the direction of public opinion on the estate tax is open to interpretation and shows how polls were strategically deployed to "interpret" that evidence for politicians.
Indeed, interest groups structured their policy positions around their efforts to manage elite perceptions of public opinion on the estate tax. Members of the Family Business Estate Tax Coalition, which in 1995 began to exert pressure to diminish estate taxes, were wedded to repeal, even as significant obstacles remain to achieving permanent repeal and readily available reform options might better serve many of their members' interests. In part, they seem to fear that, were they to abandon the goal of repeal, they might lose the momentum they had gained from effectively framing public opinion around principles that are associated with repeal, but not with simply reducing the estate tax burden. The second part of this paper describes how interest groups and political leaders actively shaped politicians' understandings of latent public opinion to serve their own policy goals. Notably, the focus was on convincing politicians that public opinion on this issue could be turned against them in the future, not on changing public opinion itself.
This effort to repeal the tax is the first serious one since the budget surpluses of the 1920s. The timing and persistence of this effort cannot be explained by the reach and rates of the tax alone, as these have been more or less constant for decades, and the estate tax was notably more onerous in the 1970s. (3) Other factors, beyond the actual burden of the tax, contributed to the appeal of repeal in recent years. Undoubtedly, the strength of the economy in 2000 and 2001, the fact that the government was running budget surpluses, demographic changes in the profiles of the wealthiest Americans, and Republican ascendance in Washington made it a propitious time for abolishing the estate tax. Yet these factors still do not explain why estate tax repeal, rather than other longer-standing conservative tax priorities that garner more support from corporate America and supply-side economists, succeeded. When the role of interest groups in shaping elite perceptions of public opinion is also considered, the timing and persistence of the repeal effort begin to make more sense.
INTERPRETING PUBLIC OPINION: PRINCIPLE OR PRIORITY?
Starting in the late 1990s, interest groups and political parties employed opinion polling strategically to understand the contours of public opinion on the estate tax. They wanted to know how it varied according to the frameworks, symbols and principles invoked; with reference to the particular reform or repeal options presented; and in juxtaposition with other priorities. This enabled activist advocates of repeal to promote to politicians the interpretation that best served their goals. In this section we examine the partisan and non-partisan poll data that entered the public debate on the estate tax. We located, through extensive archival research and interviews with political actors, publicly released national polling data on the estate tax that dates from 1997 to 2003. This period encompasses the time when estate tax repeal had its greatest momentum on the national stage. In 1997, following the passage of an estate tax reform provision to raise the unified exemption from $600,000 to $1 million, the new goal of many estate tax opponents became estate tax repeal.
Many analysts, and even strong advocates of repeal, reported being surprised by the contours of opinion that emerged. After all, considering that only the wealthiest two percent of Americans pay the estate tax and that the estate tax is the most progressive part of the tax code, the vast majority of the public could only lose from estate tax repeal. Yet, many polls show that most people support repeal when it is presented as a standalone issue--even those least likely to pay the tax and likely to be beneficiaries of the roughly $50 to $70 billion it raises each year. This amount of revenue boosts the federal budget by one to two percent, enough to fund, say, the Department of Homeland Security or the Department of Education. Is the explanation that people do not understand their self-interest? There is indeed clear evidence that many probably do not. Yet, while this is an important component of the explanation for public support for estate tax repeal, polls show that, even when people are disabused of their illusions on this score, support for repeal remains surprisingly strong. Principled judgments about fairness, which were often primed by question wording, are as important as appeals to self-interest. That said, when asked to consider its priorities or the possibility of a higher exemption, the public's verdict typically shifts so that the large majority then is found to support retaining the estate tax in a reformed version.
Perceived and Misperceived Self-Interest
If we were to impute preferences based on accurately perceived expectations of economic self-interest, those who never expect to pay the estate tax should favor keeping it, given the likelihood that repeal would entail either a relative shift of the tax burden to them or a reduction in services that might benefit them. It would be reasonable to anticipate no more than a modest showing in support of repeal: that small percentage of persons who might realistically risk paying the tax upon death, plus their likely heirs. Yet, many polls since the late 1990s have shown widespread public support for estate tax repeal, in the range of 60, 70 or 80 percent. Moreover, supporters appear to be spread more or less equally across income groups, contrary to what self-interest would predict. (4)
Preferences may be based on potentially inaccurate perceptions of economic self-interest; and misperceptions do help to explain a portion of the public support for estate tax repeal. People know very little about estate tax levels and rates and rules, as evidenced by a January 2000 Gallup poll, in which most people (53 percent) admitted they simply did not "know enough to say" whether the "federal inheritance tax" was too high, too low, or about right. Obtaining accurate information can be difficult, especially when people have an incentive to mislead you. With little background knowledge, many people seem to guess that nearly everyone is taxed at death--a misperception sometimes encouraged by question wording. For example, in a 2003 National Public Radio / Kaiser Foundation / Harvard Kennedy School (henceforth NKK) survey, two-thirds of respondents either thought "most people have to pay" the estate tax (49 percent) or said they did not know (18 percent); and 62 percent of those opposing the estate tax said one reason was because "it affects too many people." Controlling for socio-economic and demographic factors, and general attitudes towards the tax code, Slemrod (2003) uses results from this survey to estimate that the misconception that most families pay the estate tax "increases the likelihood of favoring abolition by 10.6 percent." (5)
Surveys also consistently show that the number of people in favor of repeal drops when respondents are given information on exemption levels or how many people pay. For instance, in the NKK poll, 60 percent of respondents say they want to eliminate the estate tax when the exemption level is not specified. The percentage who favor repeal drops to 48 percent when respondents are asked to consider an estate tax with an exemption of at least $1 million--which is what the actual exemption was slated to be even before the repeal law passed. When asked to consider an estate tax with an exemption of at least $5 million--which was one of the proposed reforms rejected by Congress-even fewer, 35 percent, still favor repeal.
Precisely how misperceptions about the estate tax change people's views is difficult to know. They may affect a person's perception of self-interest in repeal or her unselfish evaluation of the social fairness of the tax. In practice, these reasons are entangled because, even provided with correct information, people may misunderstand their own self-interest and their perceptions of social justice may correspond to their misperceived self-interest. For instance, once given more information about who pays the estate tax, and hearing arguments both for and against repealing it, the percentage of people believing that they or someone in their household would have to pay the tax fell from 37 to 30 percent in a 2002 Greenberg Research Poll, while support for repeal correspondingly dropped from 60 to 47 percent. Some of the change in views might, thus, be attributed to a change in respondents' perceptions of self-interest.
Yet, more remarkable than the difference made by the presence of correct information is the difference that is not made. After all, a full 30 percent of informed people still believed someone in their household would have to pay the estate tax. This result is even more extreme than another often-cited July 2000 Gallup poll showing that 17 percent of informed respondents believe they will personally benefit from estate tax repeal, even after being told that only estates valued at over $1 million would be subject to estate tax. In the 2003 NKK poll, 69 percent of those supporting repeal said a reason was because "it might affect [me] someday." Like stereotypical lottery ticket holders, Americans' judgments about their likely future wealth seem very optimistic. (6)
Principles of Fairness
Despite the important role of evaluations based on self-interest--and confused self-interest--they do not seem to account for the majority of public support for estate tax repeal. A surprisingly high percentage of people--26 percent in the NKK poll--still say they want repeal even with an exemption of $25 million or more. (7) People's judgments about tax fairness are central to accounting for the high support for repeal, and repeal proponents learned to "message" their goal in terms of principles of fairness. We do not discount the possibility that public opinion on the estate tax could also have migrated in recent decades, especially as inflation, demographic changes, social changes, and economic changes have meant that people of more diverse backgrounds would likely come within reach of the estate tax. However, we cannot determine the extent of any such shifts since, with few exceptions, similarly worded poll questions have not been asked over time. (8)
Whatever underlying shifts there may have been in public opinion, that the dramatic disparities in publicly reported polling results over the past few...
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