Estate
tax critics never let facts get in the way of a good story.
By Josh Hoxie
Few
things sell ideas in American politics like a good farm story.
Just
ask Representative Dave Reichert. He held a hearing recently on the impact
of the estate tax on farms and small businesses.
An
outspoken critic of the tax, Reichert was inspired by a recent story featuring
the McBrides — an old farming family from the town of Issaquah in his suburban
Seattle district.
The
McBrides first got noticed over the summer, when The Seattle
Times reported that
they had sold the last farm in Issaquah, a sign of the changing economy and
demographics of the community.
The
McBride family had farmed the land for over a hundred years and over the course
of six generations. The 12.5-acre lot sold for $4.5 million to a developer
planning to build a luxury housing development called Avery Pointe,
where houses start in “the low 700’s.”
Jim
McBride — son of the 97 year-old patriarch, Ralph McBride — claimed they’d sold
the land because of the estate tax. “All my parents’ wealth was in that land,”
he insisted, “and we couldn’t afford to pay the taxes that come with inheriting
it at the current property value.”
Five
days later, the paper cited the Issaquah farm in an editorial decrying
the estate tax as an attack on family farms and calling for its immediate
repeal.
Frank
Blethen, the publisher of the paper, is an outspoken critic of the estate tax
and a longtime funder of efforts to repeal it. So his embrace of the McBrides’
account is unsurprising.
There’s
just one thing: The story is completely
false. There’s no way the McBride family sold their farm because of
the estate tax.
At the federal level, estates worth less than $5.4 million for individuals and $10.8 million for married couples are exempt. So if all or even most of the McBride family’s wealth was in the land that sold for $4.5 million, they’d still have fallen below the exemption and would have paid no federal estate tax.
And
in Washington state, farms are 100-percent exempted from
the estate tax. If the family had kept the farm and the kids had inherited it,
they wouldn’t have paid a dime on the bequest.
In
fact, critics of the estate tax have tried and failed to find a farm lost as a
result of the estate tax for the past 15 years.
David
Cay Johnston took on the task in 2001, when the estate tax was much more robust
than it is today, and couldn’t find
a single one. That reporting for The New York Times won
him a Pulitzer.
There
are 2.2 million
farms and 28.2 million
small businesses in the United States, according to official
data. In 2013,
only 120 farms and small businesses owed any federal estate tax at all, and
their average value topped $50 million — more than 10 times the worth of the
McBride estate.
Which
brings me back to Reichert. Perhaps he’s just deeply concerned about this
tiny fraction of very wealthy estates. Perhaps he was misled by the
intentionally misleading editorial in The Seattle Times.
Or
perhaps he’s doing what estate tax opponents have been doing for decades: not
letting facts get in the way of a good story.
OtherWords
columnist Josh Hoxie is the director of the Project on Opportunity and
Taxation at the Institute for Policy Studies. OtherWords.org