- The Washington Times - Thursday, June 22, 2000

For three generations Mark Sincavage's family has been doing business in Pennsylvania's Pocono Mountains. Founded by a Russian immigrant, the business has survived recession, changing consumer demands and the passing of the first two generations. How it will survive the U.S. government is something else again.The problem is that when Mr. Sincavage's father died in 1989, his mother was too busy grieving to stop and become an expert in death duties or in what proponents call "estate taxes." When she died in 1998, she had done little to prepare the commercial excavation firm for what would happen when she herself died. Well, what happened is that the federal government, in the person of the Internal Revenue Service, proclaimed itself a statutory family heir and demanded a cool $400,000 in taxes. Coming on top of a $150,000 death tax to the state of Pennsylvania and some $80,000 in legal fees trying to comply with these demands, and with most of the family wealth invested in the business, Mr. Sincavage and his siblings felt they had no choice but to sell the family homestead to raise the necessary cash."My family worked hard, and we paid all our personal and business taxes for more than 35 years, providing quality jobs and tax revenue the entire time," Mr. Sincavage said at a Capitol Hill news conference held by the National Federation of Independent Business earlier this month. "I'm not Bill Gates with billions of dollars in reserves waiting to pay the government." Altogether, he said, the "estate" was well under $3 million.As early as next week, the U.S. Senate is scheduled to take up legislation that would provide relief to other families like the Sincavages. Among other things, it would phase out the death tax over a period of 10 years. Currently, the tax ranges as high as 55 percent on assets, financial or otherwise, worth more than $675,000.The Senate vote follows the overwhelming House passage of a similar reform measure this month that left the White House stunned. Notwithstanding the usual liberal appeals to the gospel of envy "tax the rich, tax the rich" 65 Democrats crossed the aisle to vote for repeal. President Clinton promptly threatened to veto the measure, and Senate Democrats scrambled to propose an alternative that would siphon off just enough Democrats to prevent passage or, should it be necessary, a congressional override of the veto.They offer a plan, as House Democratic leaders did, that would carve out larger exemptions from the tax for small businesses and farmers without cutting the government out of a share of the earnings of still wealthier persons. As long as lawmakers don't repeal the tax entirely, they well understand, a future Congress can always reach back down into the pockets of small businesses and farmers either when fewer people are paying attention to the issue or perhaps when a sufficiently grave budgetary crisis justifies doing so openly.The ideological machinery that justifies this kind of grave robbing is increasingly rusty. It's not a death tax, argues E.J. Dionne of The Washington Post. "No," he says, "it's a tax on those who inherit an estate from someone who died. The inheritors need to have done absolutely nothing to earn the money that falls to them." Or they may have done something to earn it, as Mr. Sincavage did when he starting working in the family business at age 12, but never mind that. Even by the sweat-equity standard, the feds are hardly in a position to cut themselves in for a share of the inheritance. What exactly have they done to "earn" the money that falls to them? They passed a law.Death-tax foes dismiss offers to give family businesses special exemptions from the levy, partly because they know, as mentioned above, that the tax can always "grow" back. They also know through experience that lawmakers tend to draw these tax breaks so narrowly that it can be very difficult and expensive to qualify for them. It takes expert legal help to ensure that the family does so, something that may not be foremost in the minds of grieving survivors.Another defense of the death tax is that it affects relatively few people 40,000 to 50,000 families per year the premise of the argument being that if most people can avoid the duty, it must be sound public policy. If so, it's partly because some persons do get advice on how to limit their liability and take steps to do so. Some may decide to go ahead and sell the business and pay a 20 percent capital gains tax rather than the 55 percent death tax. Alternatively, they might just buy lots and lots of life insurance to generate the cash to pay the death tax on the unhappy day it comes due, rather than invest in new plants and create new jobs. No doubt the insurance industry must find that a helpful subsidy, but it certainly isn't doing consumers, employees or owners much good.
It's not as though the feds aren't taxing "estates" already. Says Rep. Jennifer Dunn, a sponsor of the House repeal bill, "The income generated over a lifetime has already been taxed many times through income tax, capital gains, or the taxation of dividends." Only grave robbers would want more. Let them make their case to the Sincavage family and others like them.
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