Frank Blethen Wants More Money

F.B., the owner of the Seattle Times, stopped by his editorial department to get them to write this little gem about inheritance taxes. (F.B. prefers the Luntz formulation of "death tax", but I prefer accuracy. Inheritance taxes.) F.B. wants to cast this as if he is but another poor victim of revenue services that slaver at the prospect of taking his family business, and in doing so makes a number of ridiculous claims.

"The Seattle Times, which is a family-owned business, believes the right rate of death tax is zero. We pay taxes, and we believe in paying them as an ongoing business, but we see no fairness in a punitive tax that falls due only when an owner dies. That said, there is a good deal of difference between a top rate of 55 percent, which it will be after 2011, and 15 percent, which may now be politically possible in Congress."

Leaving aside that the sorts of family businesses large enough to be subject to estate taxes are usually structured in such a way as to avoid them or minimize their impact (my mother has done living trusts and corporate work, for the rare client who has actually needed those services), the typical effective rate (the tax rate once exemptions are taken into account) individuals pay in inheritance taxes is 19%, and with the increase in exemptions coming in future tax years, that number should drop without Congress taking another step. In effect, F.B. would already pay more or less the rate he says he could live with, so what's the problem?

The problem is that he wants to have the inheritance rate top out at 15% before exemptions, so that he can reduce his liability to practically nothing. He's asking the Republicans to offer a "concession" that doesn't actually concede anything.

"The issue ought to have been one of straight economics — of what is the least job-killing way to collect the government's income. Considered that way, the death tax wouldn't have a chance. But it has become politicized, with Republicans championing repeal and Democrats tending to portray repeal as a gift to the rich. Each side has made a moral issue of it, to work their constituents for donations; what gets lost is sensible policy."

The estate tax has been around for the past hundred years, and somehow the American economy has managed to chug along. Though the economy has been through some tough times, I don't think the estate taxes were the principal cause of the Great Depression, the World Wars, 1970s stagflation, or either Bush recession. It's a standard conservative habit to suggest that high taxes automatically suppress economic growth, but as we saw during the Clinton years, saying it doesn't make it so. Finally, Democrats portray estate tax repeal as a gift to the rich because it is. Wealthy Americans, the only ones who have to pay estate taxes, will receive a trillion dollar windfall (over ten years), at the expense of poorer Americans, who, if they want government services like health care or roads, will have to pick up that check.

"It is common sense that tax rates on assets should be lower than on income, because assets do not renew themselves every year. The top rate of federal income tax is 35 percent for wages and salaries. For income from selling a capital asset, it is 15 percent, and on the gain only. A death tax, which is on the whole estate, ought to be at a lower rate still — but certainly not any more than 15 percent."

It's common sense if you're wealthy and don't feel like you should have to pay taxes. And what's this about assets not renewing every year? If you own an asset--a business, shares of stock, real estate, and the like--you not only get the immediate benefit of owning it, but you can also derive a substantial income without having to dirty your hands with anything as base as work. Widows and idiot sons in this country can literally sit on their assets, living off interest, dividends, and capital gains, and through various shelters and trusts pay astonishingly little tax, while those who draw salaries subsidize their lifestyles. Paris Hilton doesn't usually bother me, but she'll piss me off big time if I and my working and middle class friends wind up paying any more of her taxes for her out of our wages.

F.B., I thought you were full of shit when you made your paper endorse George W. Bush in 2000. I won't say this is worse, but it's just as bad. J.K. Galbraith once said that conservatism in the 20th century amounts to an attempt to find some philosophical justification for selfishness. F.B. just showed us that, at least in one sense, the 20th century hasn't ended.

By the by, if you want to read more about the estate tax, click here.