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Montana Viewpoint

DEATH AND TAXES

The selling of the death of the estate tax

June 26, 2006

Fairness is at the heart of the American Way of Life, so when we hear that people have to sell the family farm to pay the “death tax,” we become irate. We should be more irate over the deception about who has to pay it that has been foisted upon an unsuspecting American public by opponents of the tax.

The use of the term “death tax” for the estate tax is the brainchild of a pollster named Frank Luntz, who studies people’s reactions to different words. People who react somewhat negatively to the words “estate tax” or “inheritance tax” respond big time negative to “death tax.”

So, according to Luntz, “If you want to kill the estate tax call it a death tax.”

The estate tax was first established in 1916, not long after America’s “gilded age” when the very wealthy “robber barons” such as J. P. Morgan, John Jacob Astor, and John D. Rockefeller, ran the country. 

It was believed to be a way to prevent the handing down of great wealth from generation to generation. This would slow the growth of a “monied aristocracy,” so reviled by Thomas Jefferson, and would prevent dynasties of millionaires from running the country. Sort of like they do today.

It was also a way to encourage charitable giving, if only to avoid the tax.

The estate tax currently brings in about 20 billion a year. That’s about one fifth of the cost of the war in Iraq in 2005, to put it in perspective.

Eliminating the tax is part of the grand strategy to “get it [government] down to the size where we can drown it in the bathtub,” as Grover Norquist, head of Americans for Tax Reform, says. The belief is that the private sector is best suited to deliver services to the American people, and can, if only the competition of tax financed publicly provided services would dry up.

Along with the tactic of calling it the death tax, the proponents of getting rid of it are using a companion tactic of scaring people who won’t ever have to worry about having enough wealth to be subject to it. In Montana this plays as “having to sell the family farm to pay the estate tax.”

Well, this is high grade baloney.

The estates of very, very few Montanans will ever have to even consider paying the estate tax. First of all, there is a hefty individual deduction of $2,000,000—$4,000,000 for couples—that is applied against the value of the estate. Estates travel tax free to a surviving spouse. For those who plan to leave the kids estates of more than that, a little—very little—financial planning will let you avoid it.

If keeping the family farm is a problem, there’s an easy solution; keep farming it. Farms and ranches are valued at rental rates instead of market value if the heirs work them for ten years from the date of the parent’s death.

Anyone claiming to have to sell the ranch to cover the taxes, didn’t have ranching very high on their list of living the good life.

Nationwide, in 2004 of all estates subject to the tax, farm and ranch property made up less than 0.5% of the total value, compared to stocks and bonds at 45%. In that year 60 out of 8467 Montana estates had to pay an estate tax.

Abolition of the estate tax is now before Congress. Keep in mind that the United States Senate is not called the “Millionaires’ Club” for nothing, and that most members of Congress are not getting food stamps.

If you look at the numbers, the odds of a Senator or Congressman paying the estate tax are way greater than they are for any mere Montanan. In fact, in some cases I think that a vote to abolish it is, if not a conflict of interest, a self-serving attitude by some.

There is a strange lineup of gazillionaires on each side of the abolition argument. The Waltons of Walmart, world’s richest family, want to get rid of it. Warren Buffet, Bill Gates Sr. and Senator Jay Rockefeller—none of them what you would call pikers—want to keep it. Scrooge McDuck could not be reached for comment.

And Andrew Carnegie, the top dog in the millionaires club of 1916, what would he say? “The man who dies rich dies disgraced,” that’s what.

 

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org