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New Orleans Pays the Death Tax

August 31, 2005

Now should not be the time, as Kevin Drum of the Washington Monthly has noted, for the politics of blame. In the wake of Katrina's devastation along the Gulf Coast, Americans should be united in providing relief, resources and support to all in need.
But sadly, that massive relief effort will take place during a time of divisive and fundamental debate about the very meaning of national unity in the United States. As New Orleans struggles for survival, the President and his amen corner are waging a full scale assault on the Estate Tax, what they derisively (and effectively) term the "Death Tax." They will continue to pursue this massive transfer of the U.S. treasury to America's wealthiest, even as a mountain of evidence shows that successive Bush budget cuts devastated New Orleans' disaster preparedness and levee maintenance...

A cornerstone of progressive societies for over 100 years, the estate tax seeks to prevent the rise and entrenchment of a permanent aristocracy of money, "dividend dynasties" with growing political power as they clip coupons. As a result, the estate tax is paid by fewer than 1% of American families. Along with progressive taxation, the estate tax helps provide one of the fundamental underpinnings of the American social contract: those who disproportionately enjoy the benefits of our economic system are morally bound to contribute disproportionately to its maintenance.
But President Bush and his allies feel no such obligation. Falsely claiming that the levy devastates family farms and small businesses, the Republicans are in fact seeking to protect only the very richest Americans. Their 2001 tax package lowered the rate and raised the estate exemption to $1 million, and after hitting a level of $3.5 million in 2009, eliminates the tax altogether for tax year 2010. Bush's goal now is to make the elimination of the estate tax permanent starting in 2011.
The cost to the American taxpayer - and national bargain is staggering. At a time of unending $300 billion budget deficits, the reform of the estate tax costs the U.S. $20 billion a year through 2010. After that, the Congressional Budget Office estimates the revenue loss could top $70 billion annually. The impact on basic services - and on the tax bill of the typical American family - will be dramatic.
Which brings us back to hurricane Katrina and the unfolding catastrophe in New Orleans. State and local officials have know for years that New Orleans was vulnerable, especially in the event of a category 5 storm. After a storm in 1995 killed six people, major work was needed to improve the levee system. In response, Congress authorized the Southeast Louisiana Urban Flood Control Project (SELA), which alotted 10 years and $430 million to the Army Corps of Engineers to build new pumping stations and repairing the levee system.
The warning signs were clear: think of it as the equivalent of President Bush receiving a presidential daily brief titled, "Category 5 Hurricane Determined to Strike in U.S." And yet in 2003, the SELA funds slowed to a trickle. The Army Corps' funding in New Orleans was slashed to due to the twin constraints of the Iraq war and the budget deficit. By Febuary 2004, President Bush proposed cutting SELA spending by 80%.
The results, as project manager Al Naomi said, were staggering:

"The longer we wait without funding, the more we sink. I've got at least six levee construction contracts that need to be done to raise the levee protection back to where it should be (because of settling). Right now I owe my contractors about $5 million. And we're going to have to pay them interest.
I've been here over 30 years and I've never seen this level of reduction. I think part of the problem is it's not so much the reduction, it's the drastic reduction in one fiscal year. It's the immediacy of the reduction that I think is the hardest thing to adapt to."

So as President Bush and Congress debate ending estate levies in America, the levees in New Orleans are crumbling and a city is destroyed.
Should basic public services in the United States be slashed so that George W. Bush and Paris Hilton may get additional millions at your expense? To use the words of the Club for Growth, "it is wrong."
UPDATE: Yet another hat tip goes to Kevin Drum of the Washington Monthly for assembling a detailed timeline of FEMA defunding of New Orleans projects and overall mission deemphasis. Be sure to also check out the great September 5th piece in the LA Times which details the gutting of FEMA, "Why FEMA Was Missing in Action."


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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