Estate tax would be unfair to family-owned businesses


opinion for the News Tribune

Last updated: April 12th, 2005 02:35 AM (PDT)

I don’t feel rich. But according to columnist John Burbank (TNT, 4-6), that’s just what I am.

Burbank calls on the Legislature to impose a new death tax to keep guys like me from shirking our responsibility to society.

I’ll compare my community commitments to Burbank’s any day. I create jobs and bring needed services to small communities that the big corporations ignore. We operate The Rainier Group, and we’ve been around for almost a century. Over those years, we’ve enjoyed our share of good times and weathered our share of challenges.

Today, we provide roughly 60 high-paying jobs and serve some 10,000 customers in Eatonville, Kapowsin, Graham, Centralia, Chehalis and Tacoma with telephone, long-distance, cable TV and Internet services.

In order to be competitive, we invest in areas where the returns are lower than those expected by the big guys. Without small, locally owned competitors like us nipping at their heels, the giants would be much slower to bring services such as broadband Internet access to smaller communities like Graham or Chehalis.

Running a small business isn’t easy. You end up agonizing over whether you can afford to commit hundreds of thousands of dollars for a new piece of equipment – and knowing that you can’t afford not to.

While the big guys sell junk bonds to finance new equipment, small-business people like me end up pledging our personal assets. And all along the way, we pay our property taxes, business and occupation taxes, payroll taxes and sales taxes.

So the notion that we’re looking for a free ride is ridiculous.

What makes the debate so frustrating for a small-business owner like me is that those pushing the death tax ignore the fact that we pay more than our share of taxes. They ignore the fact that Washington voters overwhelmingly gave the thumbs down to a separate state estate tax. In fact, the margin was about 2-to-1 against the tax.

As the voters have spoken, so have the courts. The state Supreme Court has ruled that the Department of Revenue has been collecting this tax illegally since 2001. And now the Legislature is poised to go against the public’s wishes to enact a tax that will unfairly hit the very businesses that create most of the jobs in our communities.

Ironically, even in the one instance when proponents try to recognize the potential impact of the tax, they’d create further inequities. The proposal in the Legislature would exempt family farms from the estate tax. I understand the rationale: Farmers typically have their assets tied up in land and equipment, not cash. A big estate tax bill could force them into selling at bargain-basement prices.

Farmers aren’t unique. Many others face similar challenges. The primary assets of a family fishing business are boats and other expensive equipment. The family that owns your neighborhood grocery store has most of its assets tied up in the store building and the land under it.

In our case, equipment is the lifeblood of our company. When your child connects to the Internet to do her homework, the magic that happens isn’t really magic. The facilities, hubs, switches, cable, power – things that make her connection possible – are expensive propositions. And that equipment represents much of the asset value of our business.

In fact, in most family-owned businesses cash is always tight. Paying off a huge estate tax bill means either years of unnecessary debt or selling illiquid assets, sometimes for pennies on the dollar. Either way, that means less money to invest in improving customer service and less money to pay for needed employee benefits such as health care. The current health and future survival of the business are put at risk.

As a business owner, I feel an obligation to our employees and to our customers to ensure that we’re here for them tomorrow and the day after tomorrow. That’s why my son is actively involved in company management.

I hate the notion that when I’m gone, on top of all the family and business challenges he’ll face there could be the additional burden of a mammoth tax bill – especially one that is not required of our publicly traded big business competitors.

In our business, one of the things we’ve learned is that for any complex problem there is generally a solution that is easy and simple – and wrong. Let’s hope that our legislators learn the same lesson before they impose a new death tax that will cripple a critical segment of our economy and our community.

There’s an old saying that the only certainties in life are death and taxes. But no one said that they had to happen at the same time.

Skip Haynes is president of The Rainier Group, a family-owned business that operates mostly in Pierce County.

Originally published: April 12th, 2005 12:01 AM (PDT)



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