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.

Show me an argument for the estate tax, and I'll show you a socialist argument.
Show me an argument for a capital gains tax in excess of 10%, and I'll show you a socialist argument.

Boschwitz said government should not subsidize the rich.

Okay, so not confiscating their money is the same as subsidizing the rich.

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

Of course not - they're dead when the tax is levied.

The estate tax is a black hole that eventually sucks all property into the possession of the government.

I would rather have property in the hands of individuals than the government, no matter how rich those individuals are. Eventually they will die and their worthless heirs will squander it and it will go into the hands of more enterprising people.

Once the government owns it, no one gets to use it.

I didn't read the whole article, but it seems like the writer assumes that America is just naturally a socialist society. Really infuriating.

On a side note, here in Miami, when Joe Robbie passed away, the next generation of the Robbie family had to sell the Dolphins to pay the estate tax on the team.

I guess the Democrats think this is great, make the family sell the team so they can take (what amounts to) a huge commission on the sale, then they'll pour the money into their endless bureaucracies. That's much better than having it go into the free market economy isn't it? What a bunch of jerks.

"I would rather have property in the hands of individuals than the government, no matter how rich those individuals are."

The whole idea that being rich is something deserving of punishment is basically socialist in inspiration. Lots of rich folks share this idea, though.

The whole idea that being rich is something deserving of punishment is basically socialist in inspiration...

As is the idea that freedom should be punished, for instance the idea that I should not be allowed to smoke cigarettes (I am a non-smoker) because it increases health care costs for everyone else (which it doesn't because smokers die young and ultimately place less of a burden on the health care system than people who live to be 90).

Does this lying turd-burglar realise that a new tractor can cost $500,000+? The estate tax is the exact reason why so many of the farmers I know are corporate. Even though the corporation is only the family it protects them from many bs taxes designed to "get the rich"

Apparently we have the Peoples Republik of Minnesota.

Two reasons to kill the estate tax couched in slogan or banner terms:

Those pesky Commandments say it's wrong to steal someone else's money.

Think only the rich are hi-jacked? What if YOU win the lottery?

The argument over the estate tax should not be about who is and who is not affected by it. It should be about why anyone should be subject to it at all. Of all the types of taxation, it may be the most un-American.

I have a neighbor who will be hit hard with the death tax. He bought about 300 acres of land in the 70's when it was about $40 per acre. Now it is $10,000 per acre and he is considered to be a really rich guy by the government.
All he wants to do is leave it to his kids, but they will have to sell it to pay the taxes.

"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"

$700,000, let's see, that's probably about 2 or 300 acres, not huge for a farm, it's going to take hard work to get rich with it. And there's 36 of them. Sounds like the state wants to cut 'em down to size, only poor folk allowed in Minnesota. Don't want anyone ammassing any wealth, then they might not be dependent on the Democrats, might not be so easy to control.

"They (Democrats) say the tens of millions the tax generates each year is better spent on essential government services..."

I say there is only one "essential government service," protecting the constitution. It doesn't take "tens of millions" to do it. The one exception is the need for military force to protect the constitution from the many thugs parading as government in the rest of the world.

The very idea that private citizens hard earned savings are better spent on "government services" should be repugnant to privileged to call himself an American.

The very idea that private citizens hard earned savings are better spent on "government services" should be repugnant to privileged to call himself an American.

Should be: repugnant to anyone privileged to call himself an American.

"$700,000, let's see, that's probably about 2 or 300 acres, not huge for a farm....Sounds like the state wants to cut 'em down to size, only poor folk allowed in Minnesota."

So called "land reform".... a common tactic of third world dictators pretending to be populists.

Farmers losing the farm is a myth.

Yeah, that's because the farmer is in the ground and his kids sell the property to pay for the taxes. That's why they don't "lose" the farm.

Is this guy saying that only 325 people in Minnesota will pay an estate tax? That's incredible. It's not just farms. You can end up paying an estate tax just because you own a house.

No doubt that's truer where real estate values are high--on the eastern seaboard and the west coast, and in places like Denver and Boulder. But I should think there must be thousands of Minnesotans whose families will have to sell their hardware stores, hotels, banks, farms, whatever, to pay the tax.

I'd love to know where he got that 325 figure.

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