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Reviled
estate tax actually has some supporters By
Elizabeth Allen Express-News,
September
3, 2003
And it's a Senate vote away
from being completely repealed. That wouldn't hurt David
Langford's feelings at all. After his mother died and he inherited her
South Texas ranch, he struggled for nine years to pay the $700,000 estate
tax bill, finally giving up and selling the property to pay for the loan,
the accountants and all the lawyers. Besides the financial beating
he was taking by making the annual loan payment on the tax bill, Langford
said, he feared that if he and his wife were to die too soon, his children
would be stuck with that debt — plus their own estate tax on the same
property. The law was enacted in 1916 to
keep the enormous wealth amassed by a few during the industrial revolution
from staying concentrated at the top of American society, but it's under
fire from groups that say it destroys family businesses and breaks up
family land. Nonsense, said one economist
who has worked with farmers on estate tax issues for 40 years. "They're spinning it as
though farms and small businesses need it," said Iowa State
University economist Neil Harl of the repeal bill. "That is a myth. M-Y-T-H."
In 2001, about 52,000 people,
slightly more than 2 percent of everybody who died that year, owed some
estate tax, Harl said. Just over 2,600 had taxable estates with some farm
property. "It's the Ted Turners of
the world who are being impacted here," Harl said. And those like
Langford, whose property just happens to have become extremely valuable. Even though a tiny percentage
of businesses, farms and ranches are actually affected, some argue the
cost and complexity of estate planning, and the oh-so-American dream that
your estate might be worth that much when you die, mean everyone is
affected. "The government can take
almost half of your belongings when you die," said Pat Wolff, a
Washington, D.C., lobbyist for the American Farm Bureau. "Farmers
don't think they should have to spend money to try to prevent that from
happening." Wolff could not say how many
families have been forced off the land by the tax. "We don't have those
numbers and have never seen those numbers," she said. "All of
our economic arguments are anecdotal." Langford realizes many people
won't feel sorry for him. Through estate planning, he managed to save the
Hill Country land that had been in his family since great-grandfather and
noted architect Alfred Giles settled there in 1882. He lives in a
comfortable old stone house shaded by older oaks. Around him, his cousins own
ranches that together run along a valley from the headwaters of little
Block Creek down to Old Highway 9, spreading out a couple of ridgelines to
each side. It's between Comfort and Fredericksburg and right in the middle
of some of the most desirable real estate in the region. But to Langford, and to many
others in agriculture, the land is worth more than its equivalent value in
a well-balanced portfolio. It's home, it's a natural resource they can
protect better than subdivisions would, and it's a passion "to where
we'd rather be taken out in the middle of the road and shot than
sell." That collective fighting
sentiment has been harnessed by the forces out to repeal what they have
dubbed the "death tax." It's ironic, Harl said, that
the fight to kill the tax comes at another point in U.S. history where the
gap is growing between rich and poor — and when the federal government
is facing record deficits. "Red ink as far as the eye
can see," he said. The battle began about 10 years
ago as a push by a small group of wealthy families, Harl said, including
the heirs to the Gallo wine and Mars candy fortunes. Focus groups showed
people were more likely to support a repeal of a "death tax"
than an "estate tax," hence the new name. Other members of the nation's
elite feel differently. People like David Rockefeller, George Soros,
Warren Buffet and more than 100 other millionaires and billionaires came
out in support of the tax two years ago. Buffet called its repeal the
economic equivalent of "choosing the 2020 Olympic team by picking the
eldest sons of the gold medal winners in the 2000 Olympics." The repeal campaign got a boost
when the Bush administration, in its 2000 tax-cut package, pushed through
a gradual increase of the limit an estate must be worth to be taxed until
the limit is abolished in 2010. Then the tax comes back in full force in
2011 unless opponents can kill it completely. They're close. In June the
House approved a bill to repeal it, and the Senate is expected to vote on
it early next year. The estate tax brought in more
than $23 billion in 2001, Harl said, and if it's killed the expected loss
between 2013 and 2022 would be $740 billion. "There's a very
substantial amount of money involved," he said. "That's why all
the screaming in the upper tax brackets." Harl and groups like National
Farmers Union and United for a Fair Economy say the best way to deal with
the tax's problems is to raise the amount an estate must be worth for it
to be subject to the tax. Complete repeal of the tax
would mean less federal money for trade development, conservation and
research programs that benefit agriculture, Farmers Union argues. Reform of the law and proper
estate planning tools like life insurance would protect most landowners,
said Betsy Leondar-Wright, spokeswoman for United for a Fair Economy. "This was never meant to
be a tax to catch people ... who were land-rich and cash-poor,"
Leondar-Wright said. "These folks who claim to be the friend of
farmers have actually blocked reform that would help the farmers over and
over again." But it's the principle of the
thing, Farm Bureau officials say. "Farmers view death taxes
as double taxation," Wolff said, "and if it's double taxation on
them, it's double taxation on anyone who has to pay the tax." That principle is more like a
red herring, said Chris Hartman, research director for United for a Fair
Economy. In the first place, most money
is taxed many times, Hartman said. Wages are hit by income, social
security and Medicare taxes before a paycheck is even cashed. Then each
dollar that is spent pays sales tax, the merchant that receives it pays
corporate tax, and so forth. In the second place, most big
taxable estates are made up of stock that has appreciated over the years
and never been taxed. "It's
not true philosophically, and it's not true substantively," Hartman
said. Copyright © 2002 Global
Action on Aging |
