I’m creating a new category on the blog called research. This will be used to focus on researching and discussing issues covered in the race.

I’m going to start with a quote from Jean Schmidt in the Chatfield debate: “Seven out of ten family businesses fail after the first generation because of the death tax.”

I was shocked enough about this statement to make it a point of verifying with her campaign manager that she said it. He did and he confirmed that the statistic was true, although he didn’t cite any sources.

This seems to be warped from a statistic by the Small Business Administration Office of Advocacy. Here’s a quote (July 14, 2000) from Senator Kay Bailey Hutchison:

The estate tax is a direct assault on family farms and small businesses — our local drug stores, dry cleaners, the ranches and restaurants that are so much a part of the fabric of American life. But the Small Business Administration estimates that seven out of 10 family-owned businesses fail to survive from one generation to the next – and cites the estate tax as a major obstacle to a successful transition.


It would seem that Ms. Schmidt is misquoting an old statistic that has been thoroughly debunked.

From OMB Watch:

In 2004, an estimated 18,800 estates will pay an estimated total $17.6 billion in estate taxes. That’s just 1 out of every 15,587 people in the US who will pay an estate tax this year. In 2004, only an estimated 440 estates with significant farm or business assets will pay even a dime in estate taxes. That’s about 2 percent of those who pay the estate tax, and just 1 out of every 665,989 people in the U.S. From 2002 to 2003, changes in the estate tax law have cost the federal government $13 billion. Over the next 10 years, the estate tax will raise $271 billion from only the wealthiest decedents…

The real issues are not about rural America, and not about family farms or businesses; but rather about who would really benefit — the wealthiest Americans, some of whom continue to pressure the administration with armies of lobbyists using “family business” as a misleading argument.


From last week’s New York Times:

The number of farms on which estate tax is owed when the owners die has fallen by 82 percent since 2000, to just 300 farms, as Congress has more than doubled the threshold at which the tax applies, the Congressional Budget Office said in a report [pdf] released last week…

The estate tax raised an estimated $23.4 billion last year. Repeal would shift part of the burden of taxes off the fortunes left by the richest 1 percent of Americans, some of whose fortunes were never taxed, onto the general population. The lost revenue could be made up in three ways: through higher income taxes; reduced government services; or more borrowing, which would pass the burden of current government spending to future generations…

Neil E. Harl, an economics professor at Iowa State University (Distinguished Professor Emeritus – editor) whose expertise in estate tax planning for farmers has made him a household name in the grain belt, said many Americans had a false impression that the estate tax was destroying family farming.

He said the Congressional study “adds to the weight of the evidence that this is a myth that has been well spun.”

“Farms, in particular,” Mr. Harl said, “are not in jeopardy because of estate taxes.”

Michael J. Graetz, a professor at Yale Law School who was a tax policy official in the administration of President George Bush, said repeal was primarily a benefit to people with large estates held in stocks and other securities, not to farmers.


What Jean Schmidt is really advocating is a major tax break for America’s super wealthy.

What’s more she is advocating a policy that will create a major dent in charitable giving. Again from OMB Watch:

The CBO estimated that overall charitable giving would decline between 6 and 12 percent, and the decline in charitable bequests would range from 20 to 30 percent, if the estate tax were fully repealed.


Luckily Ms. Schmidt’s organization isn’t a non-profit, but a Political Action Committee, so they wouldn’t be affected.

More information: