NEWS that the last family farm in Issaquah is being sold for residential development is a reminder of one of the subtle ills of our tax system: a death tax that forces many farm families and business owners either to liquidate their assets, or go through enormous and costly gyrations to avoid it.
The story of the McBride family, recounted by Seattle Times reporter Erin Heffernan, shows us what we lose as a result of the estate tax — in this case, the last working farm in a fast-growing suburb. Twelve acres of open space farmed by a single family since 1883 will soon become a subdivision. The family had to sell, explained Jim McBride. “There wasn’t any other thing for us to do. All my parents’ wealth was in that land, and we couldn’t afford to pay the taxes that come with inheriting it at the current property value.”
The McBride case ought to show us conventional thinking is wrong — the death tax really isn’t a whack on the wealthy.
Plutocrats can afford accountants and lawyers to preserve wealth for the next generation. Studies show estate-planning costs more than is raised by the tax — less than one-half of 1 percent of revenues, federally and in this state. Yet, owners of Main Street businesses and land-rich, but cash-poor, farms might not have the income to justify complicated ownership schemes, as was the case with the McBrides.
Washington state’s tax is especially punitive. The rate of up to 20 percent is the highest in the country — on top of a federal rate of 40 percent. The typical state exemption for the first $2 million of estate value is hardly enough for a farm or prosperous business, despite reforms by the 2013 Legislature.
An estate-tax repeal bill before the U.S. Congress, HR 2429, already has enough signatures for passage in the U.S. House and deserves consideration.
In this cash-strapped state, immediate reform might be unlikely, but lawmakers should resist temptation to go further. Washington might be a nice place to live, but if you are a business owner who wants to leave something for your heirs, it is a terrible place to die.
Editorial board members are editorial page editor Kate Riley, Frank A. Blethen, Ryan Blethen, Sharon Pian Chan, Jonathan Martin, Erik Smith, Thanh Tan, William K. Blethen (emeritus) and Robert C. Blethen (emeritus).