Location: United States

Monday, May 02, 2005

Wills, Estate Tax, and Morality

Last week the House struck hard and fast for the wealthy by voting to permanently repeal the estate tax while also voting to cut Medicare. The moral vacuum that allows such efforts to go mostly unremarked in favor of Jennifer Wilbanks is astounding. I’d say that vacuum is probably about the right size to hide an alternate universe. Which, now that I think about it, may explain everything.

Patrick Chisholm becomes the latest hack to attack the estate tax, this time spinning it as anti-environmental. He writes, “One of the most sinister effects of this tax is the needless loss of millions of acres of farmland, forest, and wildlife habitat. When a landowner dies, his or her heirs are often shocked to find out that they must pay huge sums to the government within nine months of the death, based on the value of the land. To pay the money, they are typically forced to sell the land - often to developers.” What a crock.

First of all, if the land is passed to a surviving spouse, not one dime of estate tax is owed – and this was true even before President Bush took a hammer to the program. Further, if the land is used in a family business, and the heir actually participates in the business, then a huge section of it is set aside from taxation. If there are less than fifty partners – FIFTY – the heirs can apply to make installment payments on the tax bill.

Then you run across someone like Neil Harl, who is an agricultural economist. Mr. Harl spent a significant part of his life working with farmers to help them plan their estates and deal with confusing government run farm programs. What does he say about all these farmers and ranchers who have had to sell off their land because of the punishing estate tax? "It's a myth."

In fact, Responsible Wealth spent a considerable amount of time and money during the last estate tax debate trying to find someone – anyone, anywhere – who was actually engaged in agriculture that had lost property to the estate tax. They couldn’t find one. Neither could anyone else, but that didn’t stop Republicans from stripping away one third of the social structure that Alexis de Tocqueville credited with making American truly a “land of opportunity”.

Another reason why environmentalists aren’t up in arms about the estate tax is that it is a vehicle by which environmental groups can accumulate land for conservation. In latter years, environmental groups have begun to simply buy and hold land in trust to prevent over-development. All that is required is that a person complete a land trust and transfer property to the will rather than directly to the heirs. If the heirs are named as trustees; then they can still have access and use the land completely in keeping with the terms of the trust.

Actually that’s only one way to escape the estate tax. Another is to simply declare your holdings a corporation, divide up stock (you actually have to print stock coupons) and transfer up to $10,000 per year to every single eligible heir while you are alive. The idea is to die broke after having fully administered your estate while alive. This is exactly the position that I blogged of Andrew Carnegie promoting.

Chisholm states that the tax is anti-capitalist because it taxes a person after he is dead. Nothing, of course, could be further from the truth. What is taxed is the value of the estate that the state must guarantee to be transferred to the heirs. It is a tax on failure to administrate and legally deal with your estate. The estate tax rewards those who take the initiative to wisely administrate their wealth rather than just sit on it and wait to die - which is, I believe, extremely pro-capitalist.

If Jim Wallis is right about budgets being moral documents, then it is even truer of a will. The push to alleviate the wealthy of all communal ties is a dangerous cord to weave into estate planning. A will is a last effort to create a heritage. Let’s not destroy the ability to make that heritage one of community stewardship.


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