May 2, 2006 – Two public-advocacy groups have exposed the names of eighteen ultra-rich families driving a deceitful campaign to repeal the federal estate tax.
The report, published last week by Public Citizen and United for a Fair Economy (UFE), documents the strategy of a group of elites, together worth approximately $185.5 billion, to permanently repeal the estate tax using a marketing campaign that appeals to constituents unaffected by the tax: farmers, small businesses and the middle-income families.
The watchdog groups found the families they name in the report â€“ including the owners of Campbellâ€™s Soup, Gallo Wine, Mars, and Wal-Mart â€“ through public-record searches. Both Public Citizen and UFE say the list is not comprehensive, but includes only the names of families they were able to uncover.
Towering above most of the country financially, opponents of the estate tax have a lot at stake in repealing it; the report estimates that if the tax were cancelled, the families listed in the report would collectively avoid paying a staggering $71.6 billion from the estates of deceased members. The estate tax is a tax levied on the transfer of large amounts of wealth upon death, less any portion of the estate that is transferred to a spouse or a charitable organization.
In April 2005, the House voted 272â€“162 to permanently repeal the estate tax before passing the decision to the Senate, which plans to debate the estate tax in late May or early June. Several senators are arguing for repeal; others urge "reform." Senator Jon Kyl (R-Arizona) is pushing for what the Emergency Coalition for Americaâ€™s Priorities (ECAP) is calling "repeal in reform clothes." ECAP is a coalition of organizations that has launched a grassroots media campaign to dispel the myths surrounding the estate tax.
With much to lose, and to gain, wealthy families have stepped up their marketing campaign.
Sen. Kylâ€™s proposal would lower the estate tax rate to 15 percent and raise the exemption to $3.5 million for individuals and $7 million for couples. The current estate tax rate is 45 percent; it allows for a $2 million individual exemption and a $4 million exemption for couples.
With much to lose, and to gain, wealthy families have stepped up their marketing campaign. Only, the campaign doesnâ€™t target other rich people; it targets what most people consider Middle America.
"Their marketing strategy has convinced regular Americans that the tax is going to affect them," Taylor Lincoln, research director for Public Citizenâ€™s Congress Watch, told The NewStandard. "The con job is very wealthy people scaring regular people who have nothing to fear from the estate tax, into fearing it, so theyâ€™ll call their senator and ask for a repeal. Which means nothing for them, but it means everything for these billionaires."
The estate tax only affects a tiny percentage of the population; more than 99 percent of families are unaffected by it. According to Public Citizenâ€™s analysis of data from the US Census and the Congressional Budget Office, out of a projected 2.3 million deaths in 2006, just 6,300 people will leave taxable estates.
Fewer than 1% of families are affected by the estate tax.
Yet the opponents of the estate tax have crafted a campaign that uses advertisements, editorials and cleverly coined rhetoric critical of the "death tax" to encourage groups with few taxable estates â€“ particularly farmers and small business owners â€“ to fear and detest the tax.
"Theyâ€™re pulling the wool over the average American," said Cara Morris Stern, a spokesperson for ECAP. "Theyâ€™re taking a tax thatâ€™s been in place for 100 years and lying to the American people about it by saying it threatens their bank accounts and their desire to provide for their families after theyâ€™re gone."
Repeal strategists have been deliberate in targeting these groups. A 2005 advertisement in the Seattle Times read, "Who does the Estate Tax really hurt? It may be surprising to learn that the Estate Tax severely harms women- and minority-owned businesses." Frank Blethen, owner of The Seattle Times Company, is listed among the wealthy families campaigning for repeal in the Public Citizen/UFE report.
Wealthy families have enlisted the help of organizations such as the American Family Business Institute (AFBI) and the American Farm Bureau, both of which propagate the idea that people are forced to sell their family businesses and farms to pay the estate tax. Raymond J. Harbert, who stands to inherit millions from his familyâ€™s estate, sits on the board of AFBI, which, in federal financial filings, lists its primary activity as repealing the estate tax.
This month, AFBI launched a television advertisement campaign targeted toward specific senators. "When some Americans die, they loose more than a loved one," says the voice in the ad, which plays over images of a blurred burial scene. "They lose everything they have to the cruel and unfair IRS death tax. The double tax that destroys family businesses. The tax farmers and ranchers fear the mostâ€¦."
This "double tax" rhetoric is common among estate tax opponents, who claim that estates are taxed twice: once under the income tax and once under the estate tax. But an analysis by James M. Poterba of the Massachusetts Institute of Technology and Scott Weisbenner of the Federal Reserve Board of Governors found that 36 percent of all estates consist of untaxed capital gains, such as stocks, bonds and property that appreciates in value over time. According to the analysis, the percentage of untaxed wealth rises to 56 percent for estates worth over $10 million.
A March 2006 editorial in the Grand Forks Herald, written by two Free Enterprise Fund fellows, said, "The [estate] tax often means that the family business or farm has to be sold at death to pay the tax bill and cannot be passed on to children or other family members." The Free Enterprise Fund is a conservative nonprofit organization working to enact free market reforms.
Despite these claims, the Congressional Budget Office found that under the current estate tax requirements, only about 123 farms in 2000 would have been forced to pay any estate taxes, and about 15 would not have had enough liquid assets to pay.
"Most farmers are way too small to be affected by the estate tax," said Lee Farris, senior organizer for estate tax policy at UFE. "But theyâ€™ll receive a monthly newsletter from a trade association and it will say, â€˜Call you senators and tell them to get rid of the death tax. This is going to hurt farmers.â€™ And they think, â€˜Oh, they know more about this than I do. That makes sense. I want to be able to pass my farm to my kids.â€™"
Chuck Hasselbrook, the executive director of the Center for Rural Affairs, a nonprofit farmer-advocacy group in Nebraska, says his constituency is the target of intentional misleading. "I think family farmers and ranchers are being used as poster children for a campaign that is going to hurt them rather than help them," he said.
Diana Adamson, who owns a 2,800-acre grain farm with her husband in Montana, said she is frustrated that farmers are being targeted by the campaign.
"I just want people to know that truth, which is that the estate tax doesnâ€™t affect that many people," Adamson said. "It affects people who can afford to pay it. If youâ€™ve made billions in this country, then you can afford to pay that tax."
Most owners of small, family-run businesses are not subjected to the tax. According to a recent Federal Reserve study, almost 92 percent of small businesses have less than $1 million in assets, setting them well below the current $2 million tax threshold.
Lincoln pointed out that a number of large corporations draw on their ability to call themselves "family-owned." Wal-Mart, the worldâ€™s largest retailer, is largely owned by the Walton family.
"Thatâ€™s the kind of family business thatâ€™s concerned with the estate tax," Lincoln said.
AFBI has also been behind advertisement campaigns directed at middle-income Americans, including an "anti-death tax" television advertisement that portrays World War II soldiers opening family businesses after the war and a paratrooper veteran speaking out against the tax.
Nevertheless, a spokesperson for the institute said the organization is not manipulating the public.
"The reason people donâ€™t like this tax is because it violates their sense of fairness," said Josh Kahn, AFBIâ€™s director of communications. "Itâ€™s something that really resonates with people."
While anti-estate-tax campaigners claim the excise hurts farmers and business owners, Hasselbrook, the farmer advocate, says it levels the playing field.
"Eliminating the estate tax would put typical farm families at a competitive disadvantage when competing for land, particularly beginning farmers," Hasselbrook said. "Theyâ€™ve grown up in typical farm families â€“ own some land but arenâ€™t wealthy â€“ but then they not only have to compete against all the established farmers around, they would have to compete against the wealthy heirs who have an inheritance they can draw on to buy land. The fact is that eliminating the estate tax would speed the demise of family farms."
And for others, repealing the estate tax would also increase economic stratification among Americans.
"The estate tax is one way of keeping us from getting that," Farris said. "It doesnâ€™t completely stop it but it puts a brake on it. The gap between Americans is already big and if we get rid of the estate tax, itâ€™s going to get bigger faster."