(A previous version of this article appeared in The Christian Science Monitor.)
The Obama administration aims to prevent the demise of an institution that encourages the destruction of wildlife habitat and open space. And in this legislative battle, the major environmental organizations are nowhere to be found.
At issue is the notoriously perverse incentive that forces people to sell their pristine land to developers: the estate tax.
If you own land, a business, or other high-value assets, when you die the government may take a substantial portion of that for itself, depending on the total dollar amount the assets. In the past, the government would allow one’s heirs to keep up to $600,000 of the assets, and slap a 55 percent tax on anything above that amount. Beginning in 1998 the exemption started to rise with each new year; currently it is $3.5 million.
It is scheduled to be completely phased out in 2010 and then permanently reinstated at the $1 million exemption level in 2011 when the Bush tax cuts are due to expire. Supporters of death-tax repeal are hoping that a zero death tax in 2010 would result in political support for permanent repeal. But if the Obama administration gets its way, those hopes will be dashed.
The administration has proposed not completely phasing it out in 2010 after all, which would quash any political momentum for repeal. Instead, the $3.5 million exemption level would be maintained in 2010 and thereafter. Congress still needs to act on this – expected by the end of 2009.
One of the most sinister effects of the estate tax is the needless loss of millions of acres of farmland, forestland, and wildlife habitat. When a landowner dies, his or her heirs are often shocked to find out that they must pay huge sums to the government within nine months of the death, based on the value of the land. To pay the money, they are typically forced to sell the land – often to developers.
A particular problem is the breakup of contiguous tracks of land, which are necessary for larger animals to forage and roam.
A 2000 study by the U.S. Forest Service’s Southern Research Station found that about 1.3 million acres per year of forestland had to be sold to pay the estate tax, and of the land sold, 29 percent was developed or converted to other uses. And 2.6 million acres of trees are chopped down each year to pay the estate tax. To be sure, those acreage numbers now could be lower because of the gradual phase-out of the estate tax, but in 2011 if the estate tax is reinstated, the numbers will likely shoot up again.
One would think the major environmental organizations would be clamoring for the permanent repeal of the estate tax.
But this is not the case. Most such organizations are silent on the issue. Some, such as Friends of the Earth, even support the estate tax. A spokesperson there told me that heirs would sell their land to developers anyway, even if there were no estate tax.
While some selling still would take place, the question is, would more selling be going on with the estate tax, or without it? It’s the former. After all, the tax gives most families no option but to sell. Without the tax, a large percentage of those families undoubtedly would choose to keep and preserve their land.
The FoE spokesperson also noted, presumably with a straight face (we spoke over the phone), that the estate tax encourages conservation (!) through conservation easements. These are where landowners get some tax relief in exchange for preserving their land. It is certainly plausible that an easement could induce some heirs to preserve their land, who otherwise would have sold it if there were no estate tax. But conservation easements are complex undertakings; most landowners and heirs do not go through the time and expense of setting them up. The result: far more land subject to the estate tax is sold than placed into easements.
In 1998 – the latest year for which I found statistics – the Office of Management and Budget estimated that deductions for conservation easements over the ensuing five years (1999-2003) would reduce estate tax revenue by less than two-tenths of one percentage point (0.18 percent).
Two New York Democratic members of Congress certainly seem to believe the estate tax is taking a toll on the environment. Concerned about dwindling open space on Long Island, Senator Charles Schumer and Congressman Tim Bishop put forward a bill several years ago that would defer the estate tax for those who agree to not sell their land to developers.
I suspect that a big reason for environmental groups’ support for or silence on the issue has to do with other factors. Most employees of and donors to major environmental groups hail from the left side of the political spectrum, where anything that reeks of tax cuts for the rich is anathema. Even for those organizations sympathetic to repealing the estate tax, publicly supporting that could alienate much of their donor base.
R.J. Smith of the Competitive Enterprise Institute said that in the 1970s, environmental organizations began to get captured by the left. Convinced that the source of environmental degradation was a free-market society based on private property rights, young radicals migrated into traditional conservation organizations like the National Audubon Society. He said they eventually took them over and moved their basic philosophy toward a hostility toward free markets.
And slapping huge tax on what a rich person owns when he dies is certainly being hostile to free markets.
The estate tax flap amply demonstrates that the major environmental groups and their donors are redistributionists before they’re environmentalists. If they truly were serious about helping the environment, they wouldn’t let their desire to sock it to the rich get the better of their desire to help the environment.
Patrick Chisholm is editor of PolicyDynamics.