April 11, 2000

Death Tax Kills Family Farms and Wildlife

by Clay J. Landry and J. Bishop Grewell

With Tax Day's arrival, we thought Ben Franklin's musing more than two centuries ago appropriate. "Only two things in life are certain: death and taxes." Still, a more apt saying today might end, "death and then taxes." For even in the grave, the man from the Internal Revenue Service stops by for a final audit. This final go around with the taxman threatens countless farms, ranches, small businesses, and perhaps surprisingly, wildlife.

Nearly 75 percent of all wildlife and half of all endangered species in the United States live on private lands, more often than not agricultural lands. Farmers and ranchers not only provide the food on our tables, but they also offer up the open spaces and forage areas that wildlife need. In many of the drier parts of Oregon, they provide the only watering holes for wildlife, too. The federal estate tax, however, threatens to close down these landowners and the habitat they provide.

The tax is levied when property worth more than $650,000 is passed from one generation to the next after the owners' death. While this sounds like a large inheritance, one must remember that the unexpected income is often not in the form of a liquid asset, but in the form of a business or small farm.

The National Federation of Independent Business attributes 90 percent of small business failure after the death of the founder to inheritance taxes. Charles Kruse of the American Farm Bureau Federation notes that the tax is particularly vicious in the agricultural sector. According to Kruse, children are often forced to sell off parts of the family farm to developers in order to pay the federal taxes.

Martha Clark knows this fact all to well. In 1981, Mrs. Clark's father-in-law died, leaving her the family farm in Maryland, just south of Washington, D.C. The estate came with a hefty death tax and the Clarks were forced to sell 250 acres of their land to subdividers in order to pay it. With family farms struggling to stay alive, fragmenting the land to pay the taxes can be the death knell. As Martha Clark put it, "If you had a warehouse and you sold off one corner of it to keep the rest, would your warehouse still work?"

When farms like the Clarks are forced to sell off land in strips, the property becomes increasingly fragmented. Fences are erected and roads are built. Wildlife, in turn, find migration corridors cut off and their foraging grounds destroyed by the new development. According to Michael Bean of the Environmental Defense Fund, "Federal estate tax requirements are destroying some of the largest and most important endangered species habitats in private ownership."

Considering the destructive consequences of the estate tax on wildlife and small businesses, surely it must offer some benefits. However, according to Bruce Bartlett of the National Center for Policy Analysis, the estate tax raised just 1.3 percent of total federal revenues for fiscal year 1998. A report on the death tax by the Joint Economic Committee found that "the tax produces no benefits that would justify the large social and economic costs," and "the estate tax raises very little, if any, net revenue for the federal government." In short, the funds taken in from the tax barely cover the costs of assessing it.

While benefits of the tax are dubious at best, the costs are clear-unnecessary burdens on family farms and the wildlife they harbor. People are starting to realize this. A recent Zogby Poll showed that 86 percent of Americans think the death tax is unfair. Despite the overwhelming support by both the general public and Congress to eliminate the tax, the White House vetoed a 1999 tax cut that would have completely phased it out.

The death tax issue will grow as we head into the next century. Boston College researchers estimate that a wealth transfer of between $41 trillion and $136 trillion from the older generation to the younger will occur between now and 2055. If the United States maintains its estate tax, the second highest rate in the world, you can bet more people and wildlife will feel the sting.