Estate-tax debate affects only very rich

Is it about farmers and the owners of small businesses? Or is it about multimillionaires?

The national debate over whether to abolish the tax that the federal government levies on large estates revolves around enduring images of "American Gothic"-style family farms and mom-and-pop shopkeepers struggling to stay in business.

But that hasn't prevented Democrats and Republicans from seizing the estate tax as a defining issue in close U.S. Senate races this year, including the duel between Paul Wellstone and Norm Coleman in Minnesota.

Republicans want to abolish the tax on farmers, small-business owners and anyone else whose estate — house, property and other assets — is worth more than $1 million. Democrats want to overhaul the tax, not eliminate it.

Each says its plan better protects family farmers and owners of small businesses.

But the reality is that few farmers and small-business owners pay the tax even now.

The Minnesota Department of Revenue estimates that barely three dozen farms are subject to the state's version of the estate tax, even though the state threshold is $700,000 — $300,000 less than the current federal exemption. Moreover, only 325 of the state's nearly 1.9 million households would pay any federal estate taxes.

"There's a huge amount of misrepresentation on this issue," said economist Neil Harl of Iowa State University. "Farmers losing their farms because of the estate tax is a myth."

To the wealthiest Minnesotans, though, the estate tax is very real. And they're supporting the party and candidate whose position best protects their interests.

A Pioneer Press analysis shows that about three dozen of Minnesota's wealthiest families have contributed nearly three-quarters of a million dollars into the effort to elect former St. Paul Mayor Coleman, a Republican.

And while those wealthy families — most of whom live in Edina or around Lake Minnetonka — tend to back the GOP anyway, all stand to benefit from total abolition of what Coleman calls the "death tax."

Congress has, in a way, already abolished the estate tax. It is being slowly phased out and is scheduled to disappear entirely in 2010. But in a strange twist, the law is then slated to expire — restoring the tax in 2011.

Coleman and many other Republicans want to make repeal permanent. President Bush has stumped across the country demanding total abolition of the levy, and the issue has become part of the debate throughout the Farm Belt.

Democrats, including incumbent U.S. Sen. Paul Wellstone, want to raise the $1 million threshold to at least $4 million, and add a total exemption for family farmers and small-business owners. They say the tens of millions the tax generates each year is better spent on essential government services, especially since the federal budget surplus has evaporated.

A U.S. Department of Agriculture study notes that total abolition of the estate tax would primarily benefit farms worth more than $5 million. Under the proposal Wellstone supports, the USDA estimates that just 1 percent of farms nationally would be subject to the estate tax — even disregarding a built-in exemption for family farms.

The National Republican Senatorial Committee and the White House, which have both taken extraordinary interest in the Coleman-Wellstone contest, hammer away at the issue daily. The estate tax also has become part of the debate in Iowa, South Dakota and Missouri — all places where the GOP hopes to score points with farmers.

Republicans are suggesting in ads and polls that farmers will lose land unless the "death tax" is totally repealed. They say Wellstone claims to be against the tax yet has voted against abolishing it seven times.

Wellstone spokesman Jim Farrell says the Republicans are misstating the senator's position. While Wellstone has voted against total repeal, he has never said he wants to abolish the tax entirely. "We're never going to support repeal," Wellstone spokes-man Jim Farrell said. "We support reform."

Several Republicans prominent in Minnesota and nationally say they're puzzled by the current emphasis on the issue. Before Congress upped the threshold from $675,000 to $1 million last year, the GOP had a political issue that potentially affected anyone with a nice house and a healthy stock portfolio. Now, they say, the Democrat-engineered vote in June to raise the threshold to $4 million — $8 million under certain circumstances — undercuts the usefulness of the estate tax on the campaign trail.

Even former U.S. Sen. Rudy Boschwitz, a Republican and Wellstone's former nemesis, supports the Democrat position.

"An $8 million exemption? I'd be for that," Boschwitz said. He said that would reduce the need for expensive estate planning for all but a few families. Boschwitz said government should not subsidize the rich. But he would not exempt all family farmers.

Coleman, the National Republican Senatorial Committee and allied groups say the June vote was a political ploy by Democrats.

"That vote was designed for exactly what Wellstone is using it for: It was a fig leaf," said Mike Dubke, president of the business-backed Americans for Job Security, a Virginia-based group attacking Wellstone on the issue.

Coleman called the proposal "a sham vote." He said the exemption for farmers and small-business owners in the Wellstone-backed proposal is too cumbersome and makes families spend money on estate planning that could otherwise be spent building their business. And Coleman dislikes a provision in the law that requires a family member to stay involved in the business or farm for at least five years after inheriting it.

Coleman said he wants to go to Washington and abolish the "death tax." But when pressed, Coleman did say he'd accept less than total repeal.

"Look, I prefer to get rid of this tax entirely," he said. "However, I am open to discussing limiting this to only the super-rich, if there was a way we could structure it that way. But that hasn't been on the table."

Even if Congress does nothing, only a few hundred Minnesota families are affected by the tax. And if it lifts the threshold to $4 million, that number shrinks to just a few dozen.

Who might still be affected? The Pohlad family, the Bingers of 3M, the Carlson sisters of the Radisson hotel chain, Stanley Hubbard of Hubbard Broadcasting, Glen Taylor of the Timberwolves and Richard Schulze of Best Buy — all are members of the Fortune 400. All are financial supporters of Coleman.

Add longtime GOP stalwarts such as the Pillsburys and the Whitneys, and Coleman's support from Minnesota's elite is near total. Of that group, only Vance Opperman, formerly of West Publishing, and the Dayton family are backing Wellstone. Mark Dayton is Minnesota's junior U.S. senator and is a substantial Democratic moneyman.

All told, federal records show 40 of the state's wealthiest families have contributed at least $713,000 to Coleman, his affiliated political action committees, or the National Republican Senatorial Committee. Most notable are father-and-son commercial developers Sidney and John Goodman of Chaska: Combined, they've contributed at least $81,500 to the Coleman effort.

Coleman says the state's wealthy support him because they dislike the union-friendly Wellstone, not because of Coleman's stance on the estate tax.

"Look at who's supporting Paul Wellstone: the trial lawyers. Is that bad? I don't know," Coleman said. He added that Wellstone's position as a champion for Big Labor has made him a natural target for Minnesota's business community.

That's 300 acres, so at $10K/acre it will take 300 years to make the transfer.

1. That's only if it's one heir. With several.... Many people out there have more than one heir.

2. Just enough to get under the limit. It is possible.

I believe anything over $600,000 is taxable. With today's real estate prices, automobiles, paintings, anything of value is passed onto the heirs who must pay the tax. It doesn't take a farm and equipment, or other land to add up, the ordinary homeowner leaves a lot. Death taxes simply should not be an option it is theft.

The taxes collected have been taxed repeatedly each year in various ways. To tax once more at the death of a person is unconscionable and there is no question the practice should be stopped. It is not just the "wealthy" it is everyone whose life was successful enough to leave something to their heirs be it stock, land, jewelry or anything of value...the federal government and politicians have no right to this, it is stealing/theft plain and simple!

That's 300 acres, so at $10K/acre it will take 300 years to make the transfer.

This guy needs to talk to an estate lawyer. With the different vehicles (family limited partnerships, discounts for lack of marketability) out there, I'd be willing to bet that they can legally avoid paying estate tax entirely.

If the owner has the foresight to die in 2009, there will be no estate tax anyway. ;^)

I don't care if it only affects 1 person in the whole country. Estate taxes are wrong, they already taxed the income once, they shouldn't get another slice just because that person died.

Federal and state governments already own over 40% of the land in this country. Continuation of the estate tax will guarantee that proportion will grow.

Rather than elimination of the estate tax, why not a referendum mandating disposal of public lands? Perhaps setting a "cap" of 20~25% on public ownership (allowing some for legitimate use for public parks, nature reserves, etc. etc.).

20~25% too high/low? Suggest a percentage that you think reasonable.
Please don't insist on 0%. That would be extremist and absurd.

Rather than elimination of the estate tax, why not a referendum mandating disposal of public lands?

Better yet, why not both?

Why should the government be ANYONE'S primary heir, regardless of whether they are "rich" or not?

My family is not rich. We are going to loose our farm that has been in the family a long time when my grandmother dies because of this tax. We have worried over how we could manage to keep the land because it was my grandfathers dream for us to keep it. It won't happen. The democraps taxes will have stolen it from us. This and Christian values could be why so many in the south are becoming republicans.

Is there a law that says you have to sell property at market value? If not, your grandmother can sell the farm to her heirs at a bargin basement price and you will lose nothing. It just won't be passed on at death.

Why should the government be ANYONE'S primary heir, regardless of whether they are "rich" or not?

To prevent the hereditary economic stratification and stagnation described by Jefferson.
To keep the American Dream alive, turning the ladder of economic success into an vibrant escalator that travels both up and down based upon individual merit, rather than an ill-maintained structure fraught with broken rungs.

To prevent the hereditary economic stratification and stagnation described by Jefferson.

You do realize that most American millionaires/billionaires are first generation millionaires/billionaires, don't you? Inherited wealth dissipates after a few generations. No need for a stratified, bureaucratic government to step in.

Government can give you nothing that it does not first take away, Willie Boy. I guess, like all Bolsheviks, you don't mind government taking away as long as it is from somebody else to give to you.

My grandmother and father have gone over the laws every year with a lawyer. I think the goverment will do their own assesment of the land at the sell. I have not been in on the disscussions. I just know it does not look good because we have someone farm the land for us.

Inherited wealth dissipates after a few generations. No need for a stratified, bureaucratic government to step in.

Tell it to the Rockefellers/Kennedys.

If the owner has the foresight to die in 2009, there will be no estate tax anyway. ;^)

My wife is a CPA and does a lot of estate transfer and planning work. This one just cracks them up, in a shaking-your-head-at-the-idiocy sort of way. It really doesn't do much for the citizenry.

Tell it to the Rockefellers/Kennedys.

So you want to turn America into a Bolshevik paradise because you hate the Rockefellers and Kennedys?

That's just great. I sure am glad you're just a bitter nobody.

To prevent the hereditary economic stratification and stagnation described by Jefferson.

Invoking communism in the name of Jefferson.

So you want to turn America into a Bolshevik paradise because you hate the Rockefellers and Kennedys?

The politics of envy serves some on the right as well as the left.

Huge concentrations take a few generations to fritter away. For instance, John Jr.'s generation is only 2 generations away from "the Old Man" himself, Joe Kennedy. Do you think that generation controls anywhere near the concentration of wealth the old Joe Kennedy controlled at his peak?

A fool and his money are soon parted. We don't need the government's help, no matter what Jefferson thought.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.