The 'Death Tax' Scam

The families behind the estate-tax repeal — working in concert with right-wing anti-tax ideologues — are attempting to undo a century-old consensus about taxing huge inheritances, one borne of the progressive movement in the late 19th century. The Gilded Age produced such huge concentrations of wealth that even its biggest winners agreed that they should share their fortunes rather than simply pass them along from one generation to another. Among those making the case was Andrew Carnegie, whose steel fortune dominated the nation's economy at the time. "The parent who leaves his son great wealth generally deadens the talents and energies of the son, and tempts him to lead a less useful and less worthy life than he otherwise would," Carnegie wrote, adding on another occasion that he "should as soon leave to my son a curse as the almighty dollar." The estate tax also became a cause of Teddy Roosevelt, who argued that vast fortunes passed between generations cause "great and genuine detriment to the community at large." Convinced that massive inheritances offended America's egalitarian principles, Congress authorized the first estate tax in 1916.

Fast-forward to the 1990s, when the heir to a fortune begun in Carnegie's time set out undo the work of his predecessors. Frank Blethen publishes The Seattle Times, which was founded by his great-grandfather in 1896, and runs a family company that also owns newspapers in Maine and elsewhere in Washington state. The 65-year-old Blethen, who drives to work in a $93,000 Porsche and has his newspaper's logo tattooed on his leg, is obsessed with getting rid of the estate tax — a move that would enable his descendants to pocket a family fortune once estimated at $650 million, without paying a penny in taxes. In 1995, Blethen began gathering estate-tax opponents together for annual summits at which they plotted strategy for a relentless campaign to place the issue on Congress' political agenda.

At first, the prospect seemed impossible. "People thought this was out of the question," says Graetz. After all, how could the average congressman fight to save families like the Blethens more money in a single shot than most Americans make in their lifetimes? To shift the political calculus, rich families poured millions into the effort — and created front groups to do the dirty work. According to a joint report by Public Citizen and United for a Fair Economy, at least 18 families are actively working to repeal the estate tax by pumping money into campaign donations, advocacy groups that crank out slanted economic studies and political ads slamming estate-tax supporters. Eighteen members of those families are billionaires who can be found on the Forbes 400 list; by one estimate, their clans stand to save more than $70 billion from a total repeal of the tax.

Many of the families are household names. There is the Mars family, makers of M&Ms and other candy, who would avoid $10 billion in estate taxes. There is the Gallo family, whose winemaker patriarch hoped to save an estimated $500 million from abolishing the tax. There are the Nordstroms, of department-store fame; the Dorrances, makers of Campbell's soup; and the Wegmans, owners of supermarkets by the same name. And there is the Walton family, owners of Walmart, a clan whose worth may exceed $75 billion. Their personal profit from repealing the estate tax would total $30 billion — roughly the gross domestic product of Jordan.

For Michael Crowley's complete report, check out the latest issue of Rolling Stone, on newstands now.

For more information on the estate-tax battle, see Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth, by Michael J. Graetz and Ian Shapiro.

Related Stories:

• National Affairs Daily: All the News That's Fit From the Beltway and Beyond
• More from Issue 1080