Species-Friendly Tax Cuts
Last month, Rep. Christopher Cox (R-CA) introduced a bill to repeal the federal estate and gift tax, the Family Heritage Preservation Act. Senator Jon Kyl (R-AZ) is lead sponsor of a similar measure in the Senate. This tax fills 82 pages of the Internal Revenue code and has spawned nearly 300 pages of regulations. It accounts for only one percent of federal revenue while consuming an estimated eight percent of savings.
Repeal would increase America's capital stock by an estimated $639 billion over the next seven years, according to recent economic analyses. It would also remove a substantial barrier to the survival of family farms and small businesses. "Estate taxes are nothing less than a hostile government takeover of family businesses," according to Karen Kerrigan, president of the Small Business Survival Committee.
Estate tax repeal is endorsed by the American Farm Bureau Federation, Americans for Tax Reform, the National Federation of Independent Businesses, 60-Plus, and many other groups. The House measure was introduced with 110 co-sponsors.
On March 3, Rep. Cox hosted a press conference to announce the introduction of his bill. CEI Director of Environmental Studies Jonathan H. Adler was on hand to discuss the environmental implications of estate tax repeal. Adler's statement follows.
We have heard about the economic and social benefits of repealing the estate tax, and how repeal will make it easier to maintain small family-owned businesses and family farms. These benefits are significant and important, but they are not the only reason to support the Family Heritage Preservation Act. Repealing the estate tax will also produce significant environmental benefits by removing a powerful economic incentive to develop land and liquidate natural resources.
If you inherit land in this country, you can be walloped with a one-time tax of up to 55 percent. For many landowners, if the land is not developed at the time of inheritance, it will be soon thereafter. This is especially true for countless rural Americans who are "land rich and cash poor." For them, subdividing or developing inherited land is the only way to pay the estate tax.
Consider the impact of the estate tax on endangered species. Over 75 percent of species currently listed under the Endangered Species Act rely upon private land for some or all of their habitat. Regrettably, current federal taxes and regulations often discourage the maintenance of habitat on private land. The estate tax, in particular, imposes a significant burden on private landowners who wish to maintain land in an undeveloped state from generation to generation.
This point was recently made by the Keystone Dialogue on Incentives for Private Landowners to Protect Endangered Species. Keystone's final report concluded that:
Federal estate tax requirements are a major obstacle for private landowners whose land stewardship has been sensitive to environmental value and who would like to be able to pass on their land to their heirs without destroying that value. The imposition of federal estate taxes often forces large parcels of environmentally valuable land to be broken up into smaller, less environmentally valuable parcels. Some of the best remaining habitat for endangered species is put at risk in this manner.
Some conclude that the solution lies in designing new regulations or loopholes, complicating an already arcane tax code. Instead, we should repeal the estate tax altogether. This is the surest way to stop the destruction of wildlife habitat caused by the present confiscatory tax.
For too long policymakers have labored under the assumption that the only way to enhance environmental protection is the enactment of more federal rules and regulations. We forget that existing federal laws are often part of the problem. Before imposing new regulatory requirements on private landowners, we should first identify and eliminate those existing policies which encourage the destruction of habitat. Repealing the estate tax is a good step in that direction.