Death to the Tree-Killing Death Tax
The Senate should give Mother Nature a break -- today.


Deroy Murdock

A predominantly Democratic group of U.S. senators wants to preserve a law that destroys 2.98 million acres of forests annually — an area the size of Yellowstone and Yosemite national parks, combined. When the Senate votes this morning, Republicans and fair-minded Democrats should stop this arboricide by killing the federal death tax.


“While liberals support the Death Tax in order to break up concentrations of wealth, large and concentrated land holdings often are good for the environment,” says Cato Institute tax-policy director Chris Edwards. “The Death Tax winds up favoring developers over natural habitat.”


The death tax comes alive once human beings pass away, then fatally stomps on flora and fauna alike.


According to a Congressional Joint Economic Committee (JEC) study released last month, “The estate tax undoubtedly is bad for environmentally-important habitats and is a serious impediment to preserving endangered and threatened species.” The death tax is particularly onerous for endangered animals, “since half of all listed species are primarily found on privately-owned land,” the JEC concluded, citing a May 2003 report from the U.S. Fish & Wildlife Service. Selling and splitting up land is especially tough on animals like the endangered Florida panther. It needs to run freely in up to 450 square miles of open space.


Relying on a 2001 analysis, JEC found that “approximately 2.6 million acres of forest land must be harvested each year to pay for the estate tax. Another 1.3 million acres must be sold to raise funds to pay estate taxes, of which close to one-third (29 percent) is either developed or converted to other uses.” Add these extra 377,000 acres to the figure above, and the death tax devours some 2.98 million acres each year. Put differently, a tree-filled area nearly equal to Yellowstone’s 2,219,271 acres and Yosemite’s 761,266 acres annually is converted into two-by-fours or parking spots so that Americans who just buried loved ones can endure the additional nightmare of shipping Uncle Sam large chunks of their inherited assets.


These 2001 numbers pre-date the gradual reductions in death-tax rates from 55 percent in 2002 to 46 percent today, and the increases in asset levels at which these rates apply. Nonetheless, these statistics remain relevant.


The House of Representatives voted 272-162 on April 13, 2005, to terminate this tax; President Bush will sign its death certificate, if the Senate cooperates. If the Senate does not permanently repeal the tax, it will revert from the 0 percent rate in 2010 to the previous 55 percent rate in 2011. At that point, the perverse incentives to log forests and pave prairies will rise from the dead. Indeed, they could intensify. As Baby Boomers mature, so do their properties. When they eventually pass away, more and more acreage will pass down to their heirs — likely more than in 2000, when the Forest Service’s study was conducted — and at higher values than prevailed back then. (Land prices nearly always rise across time.) Pricier property will mean higher death taxes, prompting more heirs to exploit their land to pay their tax bills, rather than let wildlife roam through untouched habitat.


“Death tax supporters think they’re visiting vengeance on rich old people who’ve gone to their graves, but they’re really wreaking havoc on other living things, like forests, meadows, lakes, and all the creatures they support,” says National Taxpayers Union communications director Pete Sepp. “Committed liberals should commit the death tax to their compost heap of history.”


A big problem here is that the death tax strikes many who are land-rich and cash-poor. In a May 2003 study, Pamela Villarreal of the National Center for Policy Analysis found that “The average tree farm is valued at about $2 million, while the average annual household income of a tree farmer is less than $50,000.” Such cash flow cannot cover huge death-tax liabilities. So, up go the “For Sale” signs. Among the 33 percent of forest owners who paid the death tax, “40 percent sold timber or land in order to make the payment … About 57 percent of those who sold land had no other assets available to pay the estate tax.”


U.S. Department of Agriculture research found that in Mississippi alone, 18 percent of death-tax cases involved the tax-driven sale of land or timber, causing increased development on those properties.

“There are tons of reasons to end the death tax: It’s economically damaging, unfair to hardworking Americans, and disproportionately hurts small and minority business owners,” says Mallory Factor, chairman of the
Free Enterprise Fund. “Atop all this, it is also environmentally destructive. The federal government appraises farmland at a higher value because of the surrounding commercialization and development of land. But farmers don’t want to sell, they want to farm. When they die, the farmland is valued so highly that the death tax ends up breaking up the family farm — and the land gets developed anyway.”


Yes, progress requires land development. Without trees, things like newspapers, desks, and homes would be rarities. Still tree harvesting and land development should satisfy market needs, not federal tax debts.


While it’s no surprise that tax fighters like Cato’s Chris Edwards, NTU’s Pete Sepp, and FEF’s Factor hate this levy — FEF has aired $3.7 million in TV commercials urging the death tax’s repeal — even the Nature Conservancy’s Michael Bean has slammed it. He once called the death tax “highly regressive in the sense that it encourages the destruction of ecologically important land in private ownership.”


It’s bad enough that the death tax double-taxes and sometimes triple-taxes the assets that decedents bequeath the bereaved. It also spells death for trees, endangered species, and other living things. The Senate should give Mother Nature a break and put the death tax to death — today.


– New York commentator Deroy Murdock is a columnist with the Scripps Howard News Service and a senior fellow with the Atlas Economic Research Foundation in Arlington, Virginia.