Down on the Farm
The estate tax and its sacrificial lambs.

By J. Bishop Grewell, a research associate at the Political Economy Research Center & a visiting scholar at the Competitive Enterprise Institute
March 12, 2001 1:50 p.m.

n January 1997, my grandmother signed the final papers to divide up our family ranch, the Grewell E2 in south-central Montana. Land cobbled together from my great, great grandfather's twentieth century homestead faced the estate tax if Grandma passed away. (As of this Valentine's Day, she was still alive, kicking, and on a steamy date.) In preparing for the future, we Grewells went through an expensive process of partitioning the ranch to avoid our own date with the dreaded death tax.

Don't let the E2 family brand fool you. My uncles and aunts were not, and are not, wealthy cattle barons. Uncle Rick used all of his mechanical skills to keep machinery running on the place. Every dollar saved went to keeping the E2 alive. Each calf that didn't survive the winter birthing elicited pained grimaces among relatives who now knew to expect fewer school clothes or a smaller Christmas.

So far, however, my family has been lucky. The 1997 estate planning made a tough year for some, but we survived. Others were not so fortunate.

American Farm Bureau Federation President Bob Stallman notes that, "Too often, farm and ranch families are forced to sell their land, buildings or equipment to meet the financial burden of Uncle Sam's death tax — a payment the government demands in cash." Frequently, he notes, "that land is forever taken out of production and lost to development." This new development comes at the expense of something nearly as dear to my family as the ranch: the environment.

Nearly 75 percent of all wildlife and half of all endangered species in the United States live on private lands. On our place, wild turkey and deer forage for feed. Sandpiper cranes, bald eagles, and hawks soar overhead. Though we seldom care for them, mountain lions and coyotes prowl the area. An occasional moose has even been seen. Farms and ranches provide the open spaces and feeding plots that wildlife require. But the federal estate tax turns the habitat into strip malls and housing subdivisions.

A new report by Mississippi State University and the U.S. Forest Service finds that non-industrial forestlands suffer, too. Of the approximately 1.4 million acres of forest lands sold every year because of the estate tax, one-fourth (350,000 acres) are lost to development, along with all the black bears, elk, eagles, and hares that tarry there. This is equivalent acreage to half a Yosemite National Park per year!

Even if land is not sold to pay the tax, habitat can end up altered. The Mississippi State/Forest Service study estimates that 2.6 million acres of forestland are harvested annually to pay the tax.

The federal estate tax is levied when property worth more than $675,000 passes from one generation to the next upon the owner's death. While this sounds like a large inheritance, the unexpected income is often not a liquid asset. Rather, it is a family ranch like the E2 or a tree farm like those studied by the Forest Service and Mississippi State. And because landowners like my relatives are frequently in the position of being dirt rich, but dollar poor, the tax topples farms just as parts are sold off to pay the government bill.

Fences are then erected. Roads are built. Wildlife find migration corridors cut off and foraging grounds destroyed by new development.

With all of the damage done, one would think the estate tax must be a major moneymaker to survive repeal. The Joint Economic Committee reports, however, that "the estate tax raises very little, if any, net revenues for the federal government." In fact, the funds taken in from the tax barely cover the costs of assessing it and yet the tax remains.

My grandmother turned 75 last year. When Valentine's Day rolls around again, I truly hope that she and the E2 are still alive and kicking. But with its growing rap sheet, I cannot say the same for the estate tax.