Taxes for Utopia

Forty-four years ago Fred Paulsrud packed up his truck and moved his family from California to Iowa to begin a new life on a farm. The Paulsruds planted corn, worked hard, and saved their money. Finally, they were able to buy the land they’d rented for so many years. As Fred grew older, he decided to give the farm to his son, Ted—and that’s when he discovered how federal tax law can destroy a family’s lifetime achievement. Fred found that if he simply gave the farm to his son, the family would have to pay exorbitant gift taxes—a sum so huge they’d be forced to sell the farm just to pay it. So much for giving the farm to his son. What about deeding the farm to his son in his will? In that case, the Paulsruds discovered they’d face inheritance taxes—again, a sum so high they’d be forced to sell the farm. Well, Fred thought, what if he sold the farm to his son? Because Fred’s land has appreciated in value, the family would have to come up with hundreds of thousands of dollars more than the price they originally paid for the farm, along with an additional 28 percent to pay capital gains taxes for the profit they supposedly made from selling their property to themselves. As Terence Jeffrey writes in Human Events, the only way the Paulsruds could pay all the taxes the government demands for transferring their property from father to son would be to sell the farm itself. “Thus has Uncle Sam rammed a dagger into the heart of the American dream,” Jeffrey writes. Of all the taxes our government imposes, the estate, gift, and inheritance taxes may be the most insidious, because they strike at the family’s ability to create long-term security for its members. The family, you see, is not just a group of related people who care about each other. It’s also an economic unit. Parents are motivated to work hard so they can give good things to their children. This is also a biblical principle: Parents are obligated to take care of their children, just as children are obligated to take care of their aging parents. So how did we end up with a tax system that interferes with this family role? People who sought a totally egalitarian society saw families as a source of inequality. It seemed unfair that children whose parents worked hard and saved started out life at an advantage compared to children whose parents were not so diligent. Taxes on estates were intended originally as a tool for creating a more egalitarian society. But one of the unintended consequences is the rupture of the moral bond between the generations: a tax policy that hurts people like Fred Paulsrud who convert years of toil, sweat, and delayed gratification into a successful farm—and who then try to pass on that heritage to the next generation. You and I ought to let our representatives in Congress know that we disapprove of taxes that destroy the economic role God intended for families—taxes that can drive farmers like the Paulsruds off the fields they’ve tilled for decades.

04/15/97