Spending Millions to Save Billions

The Campaign of the Super Wealthy to Kill the Estate Tax

By Taylor Lincoln

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Executive Summary 

Members of a handful of super-wealthy families have quietly helped finance and coordinate a massive campaign to repeal the estate tax.

These families – the members of which own the first and third largest privately held companies in the United States and hold about a 40 percent share in the world’s largest retailer, Wal-Mart – stand to save a whopping $71.6 billion if their bid succeeds.

They have relied on their fortunes, the resources of their companies and their business connections to marshal a massive anti-estate tax juggernaut that has reported nearly a half-billion dollars in lobbying expenditures ($490.3 million) since 1998.

The families also have helped finance outside groups that have spent millions on fear-mongering ad campaigns intended to sway public opinion against the estate tax. These ads have shamelessly retailed myths that the estate tax is responsible for wrecking small businesses and family farms, and that regular Americans should fear a crushing tax bill when their loved ones die.

In fact, only about one-quarter of one percent of all estates will owe any estate taxes in 2006. And the American Farm Bureau, a member of the anti-estate tax coalition, was unable in 2001 to cite a single example of a family being forced to sell its farm because of estate tax liability – and that was back when the exemption level was only a fraction of what it is today.

These families also have used their inordinate wealth to make enormous political contributions to influence elections and to help open doors on Capitol Hill. Collectively, members of the families identified in this report and their companies’ political action committees have, since 1999, made at least $27.7 million in contributions to candidates and federally focused political committees, largely to unregulated Section 527 committees.

Members of the super-wealthy families have also helped finance political campaigns by serving as top fundraisers for President Bush. Seven members of the families, employees of the companies they control or employees of the foundations they control have served as “Rangers” or “Pioneers,” Bush’s term for those who have collected $200,000 (Rangers) or $100,000 (Pioneers) for his campaigns. Bush, in turn, has adopted the talking points of the repeal advocates.

The stakes of the campaign are great, not only for the super-wealthy families, but also for the public. If the families’ repeal bid succeeds, it will cost the U.S. Treasury about a trillion dollars in the first decade.

The families won their first big victory in 2001, when Congress passed legislation that called for gradually raising the estate tax exemption level – the amount people can leave to their heirs without paying any taxes – from $675,000 in 2001 to $3.5 million in 2009. The legislation called for complete elimination of the tax in 2010.

But permanent repeal of the tax would have been too expensive to enact without violating Senate budget rules or rounding up the necessary votes to override the rules. So, the estate tax foes accepted a one-year repeal, in 2010, with plans to fight again another day.

That new day has arrived. The House has passed legislation calling for a permanent estate tax repeal and Senate Majority Leader Bill Frist (R-Tenn.) has pledged to bring a vote on the issue to the floor of the Senate in early May.

For their campaign, the estate tax foes have relied on stealth, fear and fraud.

The most fundamental facet of their strategy has been maintaining a low profile while keeping up a steady drumbeat about the tax’s toll on small businesses. Frank Blethen, the patriarch of one of the super-wealthy families profiled in this report, articulated this strategy plainly when he said that the repeal campaign should not appear to be one of ultra-wealthy white millionaires. “We need to stress the harm to women and minorities,” he told allies. The Seattle Times, Blethen’s newspaper, promptly published an ad lamenting the tax’s toll on women and minorities.

The groups financed by the super-wealthy families have attempted to strike fear in Americans by running commercials that falsely claim or insinuate that the estate tax is wreaking havoc on family businesses and threatens to snatch the savings of ordinary Americans at death.

Facts do not support their claims. Only an infinitesimal percentage of all people who die in a given year leave businesses that amount to more than half the value of their estates and are subject to the estate tax. And those leaving legitimate family businesses are eligible for low- interest loans to help defer the effect of the estate tax.

Repeal advocates have resorted to extreme means to find examples to support their cause. In the wake of Hurricane Katrina in September 2005, Sen. Jeff Sessions (R-Ala.) asked the founder of the American Family Business Institute (AFBI), one of the anti-estate tax groups profiled in this report, to search for an example of anyone who died during the storm and whose heirs would be harmed by the estate tax. The AFBI founder proceeded to canvass Internet obituaries, but his search was in vain.

Small-business owners do not feel nearly as strongly about the estate tax as the billionaires who have used them to do their bidding. In a survey of small businesses by the National Federation of Independent Businesses in 2004, the estate tax ranked just 36th out of 75 problems. It came in below such concerns as “telephone cost and service,” “ability to cost effectively advertise” and “controlling my own time.”

The estate tax foes, meanwhile, have infused the debate with a steady stream of myths and misleading statements. Among their biggest whoppers is that the estate tax costs nearly as much – or as much – to collect as it brings into the treasury. In fact, the annual revenue from the estate tax is more than double the entire budget of the IRS.

Another ready talking point has been the argument that the levy represents a double tax. This one is particularly ironic in the case of the wealthy families because most of their assets have yet to be taxed a first time, let alone a second. A study commissioned by the pro-repeal AFBI assumed that 70 percent of wealthy families’ assets were in the form of untaxed, unrealized capital gains. For many families, the AFBI’s researchers said, the figure was as high as 90 percent.

A final argument against the estate tax – castigated as the “death tax” by its critics – is that it represents an unjust levy against hard work and thrift. But most of the members of the super- wealthy families profiled in this report are unqualified to make such claims themselves. In only a handful of the families profiled in this report is the individual who actually earned the fortune still alive. Thus, most of the members of these families can attribute their wealth to inheritance, not to their own hard work.