The Power to Destroy

My name is Bob Lord. I am the Patriotic Millionaires’ Senior Advisor on Tax Policy and an Associate Fellow at the Institute for Policy Studies. Before my time as an advocate for a more equitable tax code, I practiced tax law for forty years and ran for Congress back in 2008.

This week, we wanted to do something a little different for the Closer Look. I recently read Professor Michael J. Graetz’s book, The Power to Destroy: How the Antitax Movement Hijacked America, which came out last month. I found the book to be so insightful that I wanted to share my reaction – and explain why the book is essential reading for those who want to fix our broken system.

What do the federal tax legislation signed by the past eight presidents and the forces that shaped that legislation tell us about the zeitgeist of American culture over the past half-century? A lot, it turns out. It’s not a bright picture, and it will become far darker if the trend continues much longer. The upcoming legislative battle over the Trump tax act provisions expiring in 2025 will be a crucial showdown. If the subject matters to you, and especially if you want to be engaged in the upcoming tax policy battle, you’ll want to read this book.

Professor Graetz is a Professor Emeritus at both Columbia and Yale Law Schools and is one of the nation’s foremost thought leaders on tax policy. Years ago, I read Professor Graetz’s first-rate analysis of the estate tax repeal in Death by a Thousand Cuts: The Fight over Taxing Inherited Wealth. That book’s findings and conclusions turned out to be indispensable to my work on estate and gift tax reform.

Before we go on, I’ll add a disclaimer of sorts. In my work, I’ve had the occasion to seek Professor Graetz’s opinion on tax matters. He’s always been quick to respond and generous with his time. So I consider him a friend. And the book does include a discussion of Nike founder Phil Knight’s estate tax avoidance, which I brought to the attention of Bloomberg writers a few years ago. In other words, I had exceptionally high expectations for The Power to Destroy, and I’m happy to report that Graetz’s new work exceeded them.

The book explores how, over the last fifty years, the antitax and antigovernment movement moved from fringe to mainstream and how it now threatens the long-term economic stability of the country. Unimpeded by any semblance of opposition, antitax advocates – through their attacks on the IRS, protection of tax loopholes, and massive giveaways to the wealthy and corporations – now wield the “power to destroy” the country.

The brilliance in Graetz’s analysis is how it flows seamlessly from one administration to the next, all while highlighting the gathering storm of the antitax movement and the gradual weakening of the forces opposing it.

Graetz makes clear that, not unlike most dark elements of America’s history, the antitax movement has a racist origin. The changes in the politics behind federal tax policy started to appear in legislation in 1978, but the relevant history goes back much further, all the way to the Supreme Court’s decision in Brown v. Board of Education in 1954. The story that Graetz deftly chronicles is one of how the reaction, mostly in southern states, to Brown evolved into a near cult-like movement against taxation. The history is equal parts fascinating and depressing.

It’s worth noting here the 2017 masterpiece Democracy in Chains, by Duke Professor Nancy MacLean, which detailed how the libertarian takeover of conservative legal and economic philosophies originated in Brown v. Board. It makes for an interesting companion read to Graetz’s book.

But back to The Power to Destroy. I spent close to forty years practicing as a tax attorney, yet still learned quite a bit from Graetz’s new work. That’s not to suggest the book is overly technical. Quite the opposite. Graetz’s analysis focuses on the tax concepts all of us can grasp – think tax rates, capital gains, and loopholes – to explain the evolution of tax policy over the past half-century. You won’t find your head spinning from the discussion of arcane tax code provisions like original issue discount or passive activity losses. In the end, the discussion of actual tax code provisions is just deep enough to make the book’s central argument: that the forces driving the antitax movement and the impotency of the opposition have hardened over the years and are now jeopardizing America’s long-term economic vitality.

To be sure, there were some parts of the book that I somewhat took issue with. Graetz spends a lot of ink focusing on the fiscal impact of the antitax movement and the sustainability of ever-increasing budget deficits. I’ve spoken out before about my belief that the hysteria over the country’s $34 trillion national debt is overblown. Contrary to popular wisdom, a large national debt is not inherently a bad thing. In theory, because the federal government issues the currency that we all use, we will never not be able to repay our debts. That’s not to suggest that we shouldn’t be concerned with overspending and overheating our economy, but again, I disagree with Graetz’s implication that large budget deficits are something to be unconditionally feared.

Instead, I worry a lot more about another harm that the antitax movement has wrought on our country that Graetz highlights: extreme, destabilizing, and ever-increasing income and wealth inequality. I do think that reining in economic inequality would incidentally bring down the national debt, but that’s not what the real danger involved with inequality is. The level of extreme wealth that we are currently witnessing is unlike anything that we’ve seen in America in over a century, and our democracy is suffering because of it. It is no coincidence that we live in a country where the 400 wealthiest Americans have roughly 22,000 times the political power of the average member of the bottom 90% and, at the same time, we also have a tax code that allows billionaires to pay lower tax rates than all other income groups.

In his book, Graetz is also critical of the Democratic strategy of opposing tax increases for the middle class, which they currently define as any household with an income below $400,000. My tax policy focus has always been the ultra-rich. I still believe that elected officials should take care to concentrate tax increases on that group, but Graetz’s argument was strong enough that it made me reconsider my original position and question whether it’s possible for tax changes to be limited in scope.

Regardless of whether you look at things through Professor Graetz’s lens or mine, however, the antitax movement poses a threat to our entire way of life. If we allow it to continue to maintain a stranglehold on conventional economic thinking, our future will not be a bright one. To confront that threat, it’s crucial to understand where we are and how we got here. For that reason alone, The Power to Destroy is a must read.

Related Posts