The battle cry against the estate tax usually rages around “farmers and family businesses.” Chuck Grassley (Iowa) has been insisting that the tax deal "makes sure the government can’t take more than half the estates of farmers and small business owners who have scrimped, sacrificed and saved their entire lives to build up a family business.” As it turns out, the estate tax only affects a small fraction of farms and family businesses.
According to a recent IRS report, these businesses account for a small fraction of estates worth $3.5 million or more:
The study shows that in 2007, investment real estate — which includes farms, undeveloped land, real-estate investment funds, real estate partnerships and other investments — accounted for only 15% of total portfolios for estates over $3.5 million. Farms are only a fraction of the 15%.
Limited partnerships and business assets account for about 5.5% of their total assets.
So what is in the big estates? Mostly publicly traded stock. The study found that publicly traded stock accounted for more than a third of the assets held by estates of $3.5 million or more.
Of course, some small businesses and farmers would get hurt from a $3.5 million rate. And there may be other good arguments for ditching the estate tax. But it’s misleading to say farmers and small businesses would bear the brunt of the tax. Unless of course, Paris Hilton’s brief stint on “Simple Life” makes her a farmer.
The real victim of the Democratic proposal would be wealthy shareholders and the stock market. Yet strangely, we don’t see politicians championing the rights of the stock market and big shareholders in their death-tax crusade.