Environmentalists' silence on the estate tax
NEW YORK — The US Congress has a real chance of scoring a major victory for wildlife habitat, open space, and reduced sprawl. But strangely, 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 of 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 $1.5 million, in 2009 it will be $3.5 million, and in 2010 it will be completely phased out. But it's scheduled to be permanently reinstated at the $1 million exemption level in 2011.
In recent weeks, the House voted 272-162 to permanently repeal the estate tax. The Senate is expected to vote on it soon.
One of the most sinister effects of this tax is the needless loss of millions of acres of farmland, forest, 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 tracts of land, which are necessary for larger animals to forage and roam.
A 2000 study by the US Forest Service's Southern Research Station found that about 1.3 million acres per year of forested land 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. (The study makes clear that people sold the assets to pay the estate tax, rather than simply to pocket some cash.)
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 would undoubtedly 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.
This is certainly true, but the question is, would more selling be going on with the estate tax, or without it? I believe 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 Friends of the Earth spokesperson also noted that the estate tax actually encourages conservation thanks to conservation easements - where landowners get 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 are not willing to go through the time and expense of setting them up. In 1998, 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, Sen. Charles Schumer and Rep. Tim Bishop put forward a bill last year that would defer the estate tax for those who agree to not sell their land to developers.
No doubt there are some within the environmental movement who genuinely believe that the estate tax actually helps, or has a neutral effect on, the environment. But 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 and the National Wildlife Federation. He said they eventually took them over and moved their basic philosophy toward anti-capitalism.
And what could be more anti-capitalist than a huge tax on what a rich person owns when he dies?