Uncle! Calf rope! Enough awreddy! Since my recent column on the estate tax, I've had an avalanche (well, OK, maybe six) of e-mails and one genuine letter, written on a lovely creamy vellum paper with real engraving, that came through the mail (what a concept!), taking issue with my comments.
(From an honest-to-goodness farmer): “I agree that few farms may be subject to the estate tax in the immediate future, since the asset threshold has been raised to $1.5 million and will steadily rise to around $3.5 million in 2010. The problem is that the threshold snaps back to around $1 million in 2011, unless the legislation is changed. With current land values of $1,000 to $2,000 and the value of farm equipment, you reach this threshold very quickly — and I sure plan on dying sometime after 2011, when the value of these assets is likely to have appreciated. Also, the estate tax is largely double taxation, and why should I have to buy an expensive life insurance policy to pay estate taxes? Unless the insurance is properly structured, the cost is a drain on my yearly income and only benefits the life insurance companies and attorneys needed to make sure the policy is structured appropriately.”
(From “a practicing accountant with over 30 years experience”): “I have yet to hear anyone tell me how anyone can justify a tax on the accumulation of wealth, as described by Bill Gates. We have a generation of boomers who stand to inherit zillions of dollars in estates, the vast majority of the value of which is due to inflation — inflated values of real estate, etc. I'm 52 years old. The generation ahead of me (the WWII crowd) worked hard, sacrificed to buy a home and perhaps a few pieces of property, never dreaming the property could be worth what it is today. They paid taxes on what they made, paid taxes on the property, and now the government wants another pound of flesh from them? There is absolutely no way anyone can justify this…It is extremely unfair for someone in my generation to be forced to sell the assets of our fathers and mothers to pay an arbitrary tax…”
(From an attorney): “Well, I never thought I would see the editor of a farm publication argue against repeal of the estate tax…In 25 years of representing farmers, actively farming myself, and owning farmland, I have seen the estate tax play an inordinate role in farm decisions — whether it was large sums paid for insurance to pay the estate tax, the time invested in planning how to confront the problem, or transfers and entity changes to fend off the estate tax, the tax is an ever-present danger and concern. Given the consolidation of farms into larger farms and the increase in land values, it's a problem that isn't getting smaller…If a person works hard and earns enough to be able to accumulate a nice estate, he has to pay taxes on every penny of that income. Where is the equity in then turning around and taxing him again when he dies, especially at a rate that can equal half his taxable estate? Is this the way to reward thrift and industry, telling the toiler that the fruits of his labor will go to the government?”
(From an agchem executive): “By what right does government tax income twice — once when earned and again upon death? Class envy is an easy reason to support taxing the rich, but who ever got a job from a poor man?…The ‘cost’ to the U.S. Treasury of any tax cut is always overstated because Washington only projects the direct tax losses and never takes into account the increased economic activity that results from leaving more money in the private economy, which generates increased tax revenues. Yes, we have been running big deficits, but primarily as a result of runaway government spending, not tax cuts. The most worrisome concentration of wealth and power in this country is the federal government. Starving the beast is the best way to control it.”
(Unidentified profession): “I was extremely disappointed in the views expressed, especially coming from a publication that is supposed to be for farmers and ranchers. Most…sounded like talking points from one of the liberal activist groups in Washington. I would love to introduce you to two families in this area that I work with who had to sell of part of their farms that had been in their families for over a century, due to estate taxes. My family has a rather sizeable farm…that we have spent our lives helping our parents build and maintain. The last thing I want to happen is for me and my three brothers to be forced to sell any of this land that we worked so hard for because of estate taxes. I can see no reason to tax the family farm into oblivion.”
(Unidentified profession): “My grandparents worked hard and saved instead of spent…They sent five children to college. They were subject to the estate tax. They should not be forced to buy insurance to pay the taxes or to gift their assets. They should have this as security for a job well done. It was a horrible situation in our family knowing that they wanted the security of ownership and knowing that a large percentage of their hard-earned assets were going to the government. It is not right for a family to have to go through this. They are being penalized for being productive and saving.”
(Unidentified profession): “Isn't it kind of ridiculous to keep a tax just to get 1.5 percent of estates? Talk about zeroing in and punishing minorities.”
(From an association executive): “I have long argued that, for the great majority of farmers I represent, total repeal of the estate tax is a non-issue. The limits in place today cover the great majority of the folks I work with, but yet every time this issue comes up, it is the family farmer they cite as needing this.”
(Unidentified profession): “I wish I had the quote handy, but a former Supreme Court justice years ago said it is not only legal, but the duty of citizens to pay as little taxes as possible under the law. I didn't know it was wrong or immoral to provide jobs for hundreds of thousands as Bill Gates does, and in the process keep what's left over…after paying suppliers and employers. I have observed in my lifetime that a poor man never gave me a job. Only ‘rich people’ did. How many poor people have provided libraries or funded hospitals and universities…and how many use these facilities who otherwise couldn't afford to?”
OK, a couple of comments before putting this dialogue to rest: Although it apparently didn't come off that way, my article was intended to point up the hypocrisy of the many-years-long attempt to pass estate tax reform/repeal with the justification (?) that the primary beneficiary would be family farmers.
Every time the legislation is trotted out, it's with a litany of sob stories worthy of a TV soap opera, about wives and sons and daughters having to sell off farmland and assets to pay the estate tax. One would think, from all the rhetoric, that the legislation is solely for the benefit of farmers. There are no sob stories about Wealthy Capitalist Joe Blow having to sell off his $300 million yacht or stable of racehorses to pay estate taxes.
Yet, the major beneficiaries would be the very wealthy (which may well include a few big farm empires).
And while, as the letter writers point out, the estate tax is just as unfair to the very wealthy as it is to anyone else, the reality is that the very wealthy already have a broad range of options available in the tax laws for protecting their assets into succeeding generations. As Leona Helmsley, diva of the hotel empire of the same name, the “Queen of Mean,” the “Consummate (W)itch,” is famously quoted, “Only the little people pay taxes.” Another observation, the source of which I don't recall, “If a rich man is well-advised, he can keep every penny to himself.”
As for double taxation and being penalized for accumulation of assets, anyone who owns stock or receives dividends/interest is penalized by having to pay taxes on money earned from money that had already been taxed. If you got a paltry 2 percent interest on your bank savings account last year, Uncle Sam expects his share of that income. It's just as unfair, and affects a lot more people than the estate tax.
In my state of Mississippi, groceries are taxed. Whether it's super-rich Joe Industrialist stocking up on prime steaks at an upscale food store or a welfare recipient buying a pound of neckbones at the Save-A-Lot store, their purchases are taxed. That's fair?
In a perfect world, there would be no taxation. But with a Congress and an administration spending money like it's going out of style, piling debt on top of debt, taxes are likely to be with us for a long, long while. If the estate tax is eliminated as yet another favor to the very wealthy, those billions will have to come from someone else's pockets.
If repeal of the estate tax has merit, fine, pass it. But don't use the farm-family-being-turned-off-the-land sob story as its main justification. Just be honest about who the real beneficiaries are.