I know, I know, some people just won’t link to a post with too many f-bombs in it, so for you faint of heart, here’s a non-foul-mouthed take down of what has got to be one of the most dishonest Seattle Times editorials ever. Which is saying a lot. Because the Seattle Times has an impressive track record of dishonest editorials.
NEWS that the last family farm in Issaquah is being sold for residential development is a reminder of one of the subtle ills of our tax system: a death tax that forces many farm families and business owners either to liquidate their assets, or go through enormous and costly gyrations to avoid it.
The story of the McBride family, recounted by Seattle Times reporter Erin Heffernan, shows us what we lose as a result of the estate tax — in this case, the last working farm in a fast-growing suburb. Twelve acres of open space farmed by a single family since 1883 will soon become a subdivision. The family had to sell, explained Jim McBride. “There wasn’t any other thing for us to do. All my parents’ wealth was in that land, and we couldn’t afford to pay the taxes that come with inheriting it at the current property value.”
Credulously read this Seattle Times editorial, and you would think the McBride family was forced off the land of “the last working farm” in Issaquah thanks to the death of their patriarch and a stupidly punitive estate tax. Except, everything about this editorial is wrong:
- Working family farms are entirely exempt from the Washington’s estate tax, while 99.4 percent of family farms pay no federal estate tax at all; the number of family farms liquidated to pay the federal estate tax is estimated near zero.
- The McBride property is actually not a working farm, and apparently has not been for quite some time.
- Regardless of whether or not it is a farm, family patriarch Ralph McBride’s estate is too small to be subject to either the state or federal estate tax.
- Ralph McBride is not dead, so there is no estate yet to tax.
You wouldn’t know any of this from reading the editorial. Because the editors don’t want you to know it. But let’s be clear, the McBrides did not sell the family farm to pay off an estate tax.
First of all, the federal estate tax exempts the first $5.25 million. So if, as Jim McBride is quoted, all his parent’s wealth “was in that land,” and they sold the property for $4.5 million (as the Seattle Times reports), then there would be no federal estate tax to pay. The US Department of Agriculture reports that only 0.6 percent of family farms end up paying any estate tax. And thanks to other provisions benefiting farms, such as a special use valuation and a 15-year payment plan, the Center on Budget and Policy Priorities estimates the number of family-owned farms forced to liquidate to pay the federal estate tax at “virtually none.”
But what about that pernicious Washington estate tax? Here’s what the Seattle Times has the audacity to tell its readers:
Washington state’s tax is especially punitive. The rate of up to 20 percent is the highest in the country — on top of a federal rate of 40 percent. The typical state exemption for the first $2 million of estate value is hardly enough for a farm or prosperous business, despite reforms by the 2013 Legislature.
Except, Washington state law exempts the value of working farms entirely. All of it. If this had been a working farm for five out of the past eight years, then the McBrides would inherit it Washington-estate-tax-free, whatever its value. No exceptions. Hard to see what is “especially punitive” about that.
Of course, as I’ll explain in a moment, the McBride property is likely not a working farm. Not that it matters, because 97-year-old Ralph McBride’s land holdings comprised only a portion of the $4.5 million deal, far below the $2 million threshold for non-farm assets subject to Washington’s estate tax.
It didn’t take more than a few seconds on Zillow to locate the four properties the extended McBride family sold to developer Wescott Holdings—here, here, here, and here—and according to the King County Assessor’s Office only one property was still owned by Ralph McBride, a 7.55 acre parcel with an assessed taxable value of only $666,000. The other lots were already owned by Ralph’s heirs.
“All my parents’ wealth was in that land,” Jim McBride told the Seattle Times. So a tiny bit of fact-checking would have demonstrated that Ralph McBride’s estate couldn’t possibly be subject to either the state or federal estate tax, regardless of its classification. If anything, the family increased their chance of paying the Washington estate tax by selling his property at a premium before his death (though I’m guessing the deal is structured in a way to avoid this).
So why did the McBride’s sell the farm? Here’s what they told the Issaquah Press:
Age, skyrocketing property taxes and nearby development caused the family to vacate the 660-acre [sic] section of land at the end of June, bringing an end to one of the final remnants of Issaquah’s rural past. … “The farm just kind of petered out as the development began,” [Celia] McBride said, referring to the build out of the Klahanie area in 1985.
Of course, the construction didn’t stop there. Residential neighborhoods sprang up to surround the farm, leading to complaints about noise from the animals and financial concerns.
“The property taxes became outrageous,” she said. “My dad got older, my mom got tired and now the land is going to be a development.”
The property tax on James McBride’s parcel was $7,575.38 for 2014. The McBride family’s combined tax bill was over $26,000 across the four properties. So, yeah, maybe they were just tired of paying it. Though looking at the parcels on Zillow, I’m guessing that the family got offered a premium to sell the four parcels together, rather than the per acre price they could have demanded for Ralph’s 7.5 acres alone. That’s the way these development deals often work.
Regardless, you can’t liquidate the family farm to pay the estate tax if you don’t have a family farm.
Look at the aerial map on Zillow. Two of the lots are heavily wooded, with maybe five or six acres of potential cropland between the four. According to the Agriculture Council of America, the average US farm is 441 acres, so it would be hardly viable to farm a plot this small in the midst of fast appreciating suburban developments. Indeed, King County characterizes all four parcels as “urban residential,” not “rural” or “agricultural,” and assigns “single family” as the properties’ “highest and best use.” The narrative in both the Seattle Times and Issaquah Press describes a 660-acre farm that was gradually divided and sold off over generations. Yes, Ralph McBride continued to raise chickens and tend a garden. But so do lots of people, and it doesn’t make them farmers.
The McBride property may in fact have been the last working farm in Issaquah—that’s hard to know for sure—but it clearly ceased to be a working farm years ago. So all Issaquah is really losing with the development of the McBride properties is some open space and a tiny fragment of its history. If you find this loss upsetting, blame the land use policies.
Still, “farm” or not, the Seattle Times thesis is demonstrably wrong. If it is a working farm, then it is exempt from the estate tax. If it’s not exempt from the estate tax, then it is clearly not a farm. There is simply no way the estate tax cost the McBrides the family farm.
But what else can the estate-tax-hating Blethens do but lie to their readers? “The McBride case ought to show us conventional thinking is wrong — the death tax really isn’t a whack on the wealthy,” the editors blather. Yet according to the Urban-Brookings Tax Policy Center, 99.86 percent of estates owe no federal estate tax at all. So lacking an actual example of a family farm or small business being liquidated to pay off the estate tax, the Seattle Times had to cook one up.
How can anybody ever trust anything this editorial board writes?
Nicely argued, with the exception of #4. It’s hard to avoid estate taxation after death. One needs to plan in advance.
I wouldn’t dismiss a woman’s argument in favor of abortion rights because she hasn’t yet become pregnant.
@1 The point of #4 is that the editors present this as a fait accompli—as in “Look: the estate tax cost them their family farm!” The leave the impression that Ralph McBride’s death forced them off the land. That’s part of the emotional resonance of their lie.
@2
I understand that. But the avoidance of an estate tax (if that were actually the reason for sale – I otherwise agree with your whole concept of the dishonest editorial) requires a property transaction to occur before death, right? People make financial moves in advance of a potential taxable event, either to avoid or to mitigate the effects of such an event. The oldster would have to be alive for that to happen. Which is why I don’t think #4 works for you.
I don’t see much space there for growing crops or raising livestock. Maybe all the cows are in the woods?
@3 If the heirs waited for Ralph to die before selling, they would get a basis step-up that would exempt his holdings from capital gains taxes, so I’m wondering what’s in it for them to sell now?
“The McBride case ought to show us conventional thinking is wrong — the death tax really isn’t a whack on the wealthy,” the editors blather.
This really is over the top. You can’t owe estate tax unless the estate is worth millions. That isn’t wealthy? It is to most people. Maybe the Blethens are so rich they think of $2 million as pin money.
Most rabbits, including me, would be giddy to come from a family subject to estate taxes. (I got one-sixth of an estate worth under $1 million; actually less, because my sisters were given larger shares.)
It shows, if anything, how out of touch the Blethens are with this community. Seattle is awash in money, which is visible everywhere (e.g., construction cranes dotting the skyline); but here, as everywhere, wealth is very concentrated and the general public is much more interested in the minimum wage than the estate tax. Maybe that explains why the Blethens resort to hyperventilated rhetoric to call attention to their pet issue. You know, the kids banging with sticks on metal garbage can lids so you can’t ignore them.
When the Seattle Times endorsed Geo. Bush the 2nd time, it told us everything we needed to know and we stopped reading it. I would suggest this as a course of action.
Bob Blethen is one of the nicest people I have had the pleasure of meeting and calling my friend, so please baack off a little on thhe sniping.The Blethens have sold everything,, too, as have I
Best, DougS.
Fuck, I’d love to have $4.5 million in cash drop into my lap. Who the fuck cares if we have a farm in Issaquah? It’s like it was of meaningful size nor, apparently, was even functioning.
This should be a goddamn good news story about a family that just got catapulted into the 1%.
@1 “It’s hard to avoid estate taxation after death.”
No, it’s easy, and few people pay these taxes. Acquiring enough wealth to owe estate taxes is hard, unless you’re born to it. Most people will never have anywhere near that much.
Well, they should just avoid the estate tax fair-and-square like everyone else, including Bill and Hillary Clinton and Mitt Romney.
http://www.bloomberg.com/news/.....-back.html
The real rich don’t pay the estate tax. Only the upper-middle and lower-upper classes get hit.
@8 I don’t know who Bob Blethen is or what role, if any, he has at the Seattle Times. His name has not been mentioned in this blog until now. Frank Blethen runs the Seattle Times and uses it as a personal soapbox; these commentaries are directed at him and his editorial page staff.
No one’s saying Frank can’t print whatever he likes in his newspaper. That’s his prerogative as a private business owner-manager. But when you have a bully pulpit, and use it to influence public opinion, you’re fair game for criticism of what you say from that pulpit.
I agree with Goldy this editorial is dishonest. Goldy walks his readers through it, and makes his case. Why should he back off? Ray Peers, the army general appointed to lead the My Lai investigation, wrote in his official report that, “The first duty of free men is to call things by their right name.” This single sentence can well serve as a lighthouse for all of us.
@11 $2 million is upper middle class? I call that “rich.”
I’m sure everything will be better at the Times with the addition of its newest editorial board member, Robert Vickers. Voted for Romney, sees no difference between Democrats and Republicans and doesn’t much like trade unions. But he’s African-American so that’s diversity, right?
http://blogs.seattletimes.com/.....al-writer/
@8, I don’t know why you’d think that we care who you know and call a friend, and you needn’t sign blog posts with “Best…”. Posts aren’t handwritten letters to your friends.
It’s a “mature tree farm,” right ?
and, although we think Blethen rules the roost, it sounds like they’re a million dollars or so short of a complete takeover.
http://www.mcclatchy.com/2006/.....mpany.html
The Seattle Times Company
http://www.seattletimescompany.com
The McClatchy Company owns 49.5 percent of the voting common stock and 70.6 percent of the nonvoting common stock of The Seattle Times Co., which publishes The Seattle Times newspaper and five affiliated newspapers in Washington state.
@17 Back in 2009, McClatchy wrote down its 49.5 percent stake in the Seattle times to zero.
@4 – Judging by the length of the shadows in the satellite imagery, at this time of day all of the cows should be comfortably roosting in the trees, high up and safe from predators.
@14 I don’t really care what Vickers’ politics are. I just hope he can write. It would be nice to have a worthy foe for a change.
@17 The McClatchy Company is damn near bankrupt itself, so what we have here is two one-legged cripples trying to walk by holding onto each other.
McClatchy’s stock is almost worthless. Long-term debt is three times market capitalization and 88% of total capital is debt (according to Value Line). The company suspended its dividend in 2009 and has no apparent plans to pay dividends ever again.
Like Seattle Times, McClatchy is run by family members, who inherited a newspaper chain built by their forebears but apparently not much of their forebears’ business acumen. (Its stock has plunged 94% since 2005.)
I don’t know what Seattle Times is worth, or if it’s worth anything after subtracting its debts. Frank Blethen has claimed it’s not profitable, but that was for labor negotiation purposes, and getting out of joint operating agreement purposes, and maybe (for all I know) also explaining to other family members why their dividend checks are so small purposes. What you really want to see, though, is the profit-loss statement he shows to his bankers, because banks don’t ordinarily lend to bankrupt or money-losing ventures.
I don’t know if McClatchy or someone else could buy out the Blethen family for $1 million plus assumption of debts and liabilities. But there’s little reason to believe a McClatchy-run Seattle Times would be any better than a Blethen-run Seattle Times, either in a business sense or a journalist sense. Either way, this horse looks ripe for the glue factory.
(Full disclosure: Roger Rabbit doesn’t own McClatchy stock. Duh-uhh, do I look that stupid?? All but 2 of my 38 stocks pay dividends, and those 2 are accidents — they used to pay dividends once upon a time, back when they were worth what I bought them for. Even Roger Rabbit makes mistakes; I just admitted it. But McClatchy? No, I didn’t make THAT mistake. I bought Gannett’s stock, and Gannett’s stock has more than doubled in 2 1/2 years, while McClatchy rots.)
@14,
Good, they finally have someone to replace Bruce (I hate farm subsidies and am now part of that ST pension-teat-sucking class) Ramsey.
If it were even about the farms, the ST would be cheering for one less farm asking for federal subsidies.
http://seattletimes.com/html/o.....uce26.html (this one is fun, because Bruce defends GOP Didier as having paid for the crop insurance and neglect how subsidized that is)
The Times reported total government payments to Didier of $272,927. But of that, $111,905 was a claim on a crop-insurance policy he had paid for. You can’t count that as a subsidy.
http://seattletimes.com/html/e.....d_dum.html
@22 I remember when Bruce Ramsey was writing and editing for the UW Daily. Now he’s retired. It almost makes me feel old.
If I had to live on McClatchy dividends I’d be dead. Meanwhile, I donate my Gannett dividends to HA.
@13 If $2 mil in assets is still “rich”, it’s only just barely so.
Death Tax is literally a Death Tax for the poor and middle class. The law only benefits the extremely rich. 2013 elected officials increased tax free inheritance from $1 million to $5 million and reduced the amount of taxes after that from 55% to 35% resulting in 1200 people receiving $40 Billion of our money that would of gone to serve 2 billion people in the US. This is called redistribution of wealth, from the poor and middle class to the wealthy 1%. So your choice support the rich by saying it isn’t fair to tax them, or support the 99% of Americans.
VOTE to SUPPORT Democratic legislation to overturn the Death Tax that only serves the rich. Tax H.R. 4061 https://www.popvox.com/bills/us/113/hr4061/report#nation
Tool: Estate Tax History, charts: http://www.cbpp.org/cms/?fa=view&id=1204
@26 McDermott’s bill obviously is a non-starter in the current Congress, but here’s what it would do:
“Official Summary
Sensible Estate Tax Act of 2014 – Amends the Internal Revenue Code to:
(1) establish new estate tax rates of between 41% (for estates with a value in excess of $1,000,000) and 55% (for estates with a value in excess of $10 million),
(2) allow a $1 million estate tax exclusion, and
(3) provide for an inflation adjustment to such amounts for decedents dying after 2014. Restores the estate tax credit for any estate, inheritance, legacy, or succession taxes paid to a state (expired after 2004). Repeals the deduction currently allowed for such taxes. Sets forth estate valuation rules for certain transfers of nonbusiness assets and limits estate tax discounts for certain individuals with minority interests in a business acquired from a decedent. Requires that the value of the basis in any property acquired from a decedent or by gift be consistent with the basis as determined for estate and gift tax purposes. Requires executors of estates and donors of gifts required to file a gift tax return to disclose to the Secretary of the Treasury, and to recipients of any interest in an estate or a gift, information identifying the value of each interest received. Expands rules for valuing assets in grantor retained annuity trusts to require that:
(1) the right to receive fixed amounts from an annuity last for a term of not less than 10 years and that such fixed amounts not decrease during the first 10 years of the annuity term, and
(2) the remainder interest have a value greater than zero when transferred. Terminates the generation-skipping transfer exemption for certain long-term trusts (perpetual dynasty trusts) 90 years after the establishment of such trusts.”
http://www.opencongress.org/bill/hr4061-113/show
For starters, let’s stop using the rich folk’s (and Far Right’s) term “Death Tax,” and start calling it what it is: “The Rich Kid’s Tax.” It doesn’t take a single cent from the person who dies; God (or if you prefer, Nature) does that. (“I’m reminded of the story about Marshall Field. When he died, someone asked “How much did he leave?” The answer: “All of it.”) The tax in the rare occasions when paid comes from children who are about to receive, through no work of their own (except perhaps not so offending their parent as to be disinherited), a shitload of money. Rich Kid’s Tax. Please.
Goldy, you missed a great opportunity here. Why are property taxes so high? Perhaps because we don’t have real state funding via an income tax? Who caused that? Oh right, the Blethen/Eyman buddies.
I think the Editorial Board mis-read the news article and went off on a pre-packaged (and erroneous) tirade. The key quote is, “‘With my parents setting up their estate there wasn’t any other thing for us to do financially [but sell],’ said Jim McBride, who oversaw the sale. ‘All my parents’ wealth was in that land and we couldn’t afford to pay the taxes that come with inheriting it at the current property value.'”
I don’t think they were talking about the estate tax (which makes little sense for the reasons mentioned) but the annual real-estate tax that would be due. I think their complaint is that with development their taxes have gone up too much for them to stay. In other words, they’re not complaining about taxes due during inheritance but taxes due after inheriting (and keeping) the property. Yes, there’s ambiguity, but try reading it both ways and see which makes more sense.
@30 Ring bell, watch ST editorial writers scurry to cheese.
This should be aimed at Growth Management Act, not the estate tax. This is the stated goal of GMA by encouraging more growth in Urban Growth Areas, which is why it is urban residential and not rural.