Peter Flaherty
National Legal and Policy Center
Wednesday, Oct. 16, 2002

This monstrosity is the federal estate tax, a.k.a. the death tax. For many years, heirs have had to pay 55 percent of a deceased person's assets to the federal government, after the first $600,000, which was exempt. Last year Congress voted to gradually reduce the tax to zero by 2010, but it is scheduled come back in full force in 2011.

The tax is levied on assets such as homes, bank accounts, stocks and land holdings. Often, the only way to raise money to pay it is to sell the assets, including the land. Developers eagerly snap it up.

According to a study carried out jointly by the U.S. Forest Service and Mississippi State University, an estimated 400,000 acres of forestland per year has been developed because people were forced to sell the land to pay the death tax. And that is just forestland. To my knowledge, no similar studies have been carried out for farmland. But Dennis "Duke" Hammond of the Florida Fish & Wildlife Conservation Commission estimates that because of the tax, millions of acres per year are at risk of getting developed into suburban subdivisions, strip malls and industrial sites.

Adding insult to injury, the amount of forestland whose trees must be harvested each year to pay the death tax is an estimated 2.6 million acres, according to the Forest Service/MSU study.

Skyrocketing land values are exacerbating the problem. There are thousands of "land rich and cash poor" landowners in the United States. When they die, their heirs are often dumbfounded to learn that they may owe millions of dollars in estate taxes. To pay the bill they have to sell the land. As Duke Hammond says, "You used to be able to sell tractors and cows in order to pay your estate taxes, and now you've got to sell the land underneath them."

All this should be enough to outrage any environmentalist. Not only is the death tax a leading cause of urban sprawl, but also of habitat destruction. For example, the Florida panther needs large swaths of uninterrupted habitat to survive, yet that habitat keeps getting broken up and developed because the private owners fall victim to the estate tax.

Earlier this summer the House voted to abolish the death tax permanently, but the Senate fell four votes short of the 60 needed to do so. Unfortunately, the debate focused on almost everything except the implications for urban sprawl. Environmental groups were silent on the issue.

Incredibly, many environmental organizations including the National Audubon Society, Friends of the Earth, and Defenders of Wildlife actually oppose repealing the death tax. How can this be? It may have something to do with their own self-interest, namely their assumption that the tax prompts more giving to nonprofit organizations as a result of estate planning.

Environmentalists instead seem to be in favor of merely tinkering with the estate tax, such as encouraging something called "conservation easements." In exchange for estate tax relief, these enable landowners to enter into a legal agreement to ensure their land or sections thereof are never developed. But these complicated accounting schemes only somewhat mitigate the negative environmental effects of the death tax. Most landowners do not utilize conservation easements, and the ones who do are usually only able to save a portion of their property from development.

Undoubtedly, the motivation for the pro-death tax environmentalists is ideological. In surveying death tax proponents' arguments, "equitable distribution of wealth" ranks at the top. And many environmental activists have strong left-leaning views. Class warfare and disdain for "the rich" figure prominently into their worldview – apparently, even more prominently than protecting the environment.

Peter Flaherty is president of the National Legal and Policy Center, a nonpartisan foundation promoting ethics and accountability in public life.

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