Fighting "confiscatory" estate taxes

Nation's Business, March, 1994 by Sharon Nelton

In a column early last year, I urged family-business owners to exercise their political power by organizing themselves for long-range action to educate their various publics--including government leaders--on issues of specific concern to family-owned companies.

Since then, Robert L. Spence, the third-generation president of Pacific Lumber & Shipping Co., in Seattle, has launched the Committee To Preserve the American Family Business. His goal: the restructuring of federal estate taxes so they don't destroy family firms.

"The big problem with the estate tax is that it doesn't change with changing conditions," says Spence, who so far has lined up about 10 companies from Washington, Oregon, and Idaho to work with him.

The new group has three goals:

* To inform the general public of the critical role of family businesses in the economic health of our nation;

* To make Congress aware of the need to provide relief from the onerous estate-tax structure; and

* To achieve a shift from the governmental view of family businesses as short-term sources of revenue for the federal government to an understanding of them as long-term resources vital to America's economic health and productivity.

It didn't escape Spence's attention last year when, at President Clinton's behest, Congress reinstated the top estate- and gift-tax rates of 53 percent on taxable transfers between $2.5 million and $3 million and 55 percent on taxable transfers over $3 million; the rates were made retroactive to Jan. 1, 1993. The federal estate and gift tax had been scheduled to be reduced to 50 percent after 1992.

Spence's committee holds that the estate tax is "confiscatory." The lumber company president contends that it is destructive of this country's most dynamic and competitive businesses privately held medium-sized companies. When such businesses must be transferred because of an owner's death, he says, estate taxes are so high that often all or parts of them must be sold to pay the taxes--even a company the size of his own, with 580 employees and annual sales exceeding $300 million.

When you have to break up a company in order to get a fair price, says Spence, "you destroy the infrastructure of the communities you're involved with." That is a terrible price, he says. The new owners--usually larger companies--are less likely to be loyal to the local community and more likely to go offshore. Of family-business owners, he says: "We are local people, and we've got an interest in the infrastructure. We live right in it."

Spence decries the short-term thinkers who worry about revenue that would be lost from reducing the estate tax. He says they're not recognizing "revenue that might be generated if they didn't destroy businesses and actually helped create an incentive to expand them."

The committee has retained a public-relations firm, an attorney, and a political strategist. It has also drawn up a "white paper" outlining its position.

For more information, contact the Committee To Preserve the American Family Business, c/o Jill Mackie, Pacific Lumber & Shipping Co., P.O. Box 21785, Seattle, Wash. 98111.

As I said over a year ago, family-business owners need to exercise their collective power

Here's your opportunity.