Bill Frist’s estate-tax claims — busted

June 9, 2006

For months, if not years, congressional Republicans have highlighted what they see as the tragic consequences of the [tag]estate tax[/tag]. As a rule, they point to hypothetical horror stories, but are usually a little short on actual examples.

Senate Majority Leader [tag]Bill Frist[/tag] (R-Tenn.), however, claims to have found a real-life incident about a family in his home state. This is from an email Frist sent to his supporters 48 hours ago:

I am reminded of a case in Williamson County, TN. I know of a family there that inherited from their dad the 167 acre farm that they grew up working on. The kids considered keeping the farm … until they got the ‘inheritance tax’ bill, which typically runs 40 to 50% of the current market value of a property in excess of $1 million.

The children needed to come up with hundreds of thousands of dollars within mere months of their dad’s death. Like so many other families who inherit the family farm, they simply couldn’t do that without selling the land.

That sounds pretty awful, right? Maybe, if only Frist had his facts straight.

First, Frist is just wrong about the amount at which the estate tax kicks in. The senator’s email mentions “property in excess of $1 million,” but as MarketWatch’s Marshall Loeb explained this week, the portion of an estate that is automatically exempt from any federal taxation is $2 million (or $4 million per couple).

Second, Frist said grieving kids had “mere months” to pay “hundreds of thousands of dollars” to the government. At a minimum, this is misleading. The law says the estate tax is not due until at least nine months after a person dies, and in some cases, heirs get years.

Third, when Frist noted that the estate tax “runs 40 to 50%” of an estate worth more than $1 million, he’s not only wrong about the dollar amount, he’s also wrong about how the tax is applied — it affects an estate’s value over and above $2 million, not the whole thing.

And, finally, as Crooked Timber’s Ted Barlow told me, it’s rather disingenuous for Frist to claim that the tax hits “so many other families,” considering how much trouble Republicans have had finding real people who have had to sell their family farm because of the tax.

So, in the end, Frist was wrong about … nearly everything. Here’s a final thought: why would the Senate Majority Leader and likely presidential candidate put all of these errors in writing?

I also just busted Frist and family farm argument with the below post, originally posted for CB’s earlier article “Krugman on how to talk about the estate tax.”

21.

Gary,

One question about selling the family farm: Was the sale brought about by the burden of the “federal estate tax” or was it because the “estate tax” in your grandfather’s state put a helluva bite on the estate? My wife inherited from a family member, and our state’s estate tax put a noticeable bite on the estate–the federal government didn’t touch it.

Comment by slip kid no more — 6/9/2006 @ 5:49 pm

  • “…why would the Senate Majority Leader and likely presidential candidate put all of these errors in writing?”
    Unfortunately, the only thing that matters in an “us” or “them” fight is which side you’re on. As long as the right perceives Frist to be on their side, there is no accountability. American politics and culture has devolved into tribalism, in part because our “leaders” appeal to the worst of our natures.

  • Maybe they should make an exemption for the estates of the aristocracy. What is Britain’s tax policy when a member of the ruling class dies?

    It hardly seems fair that the wealthy scions of important industrialists should have to spend their day creating photo opportunities for the nation’s newspapers, magazines, and tabloids and at the same time earn a living. What entertainment value would the Hilton girl serve if she was poor? Don’t start with the “she earns tons of money from adult and other media groups” . . . That’s pocket change that barely maintains the life style.

  • CB asks: “Here’s a final thought: why would the Senate Majority Leader and likely presidential candidate put all of these errors in writing?”

    Perhaps it’s because he’s seen Dumbya get away with baldfaced lies so many times. He’s making his own reality to suit his purposes with the certainty that no one will call him on it. No one will be so impolite or “unbalanced” to call a liar a liar. Not the corporate press and not the dithering Dimocrats.

  • Next step, nail persistently and publicly in the blogosphere any reporter who passes the misinformation along. Not the publication or the channel but the reporter. If we get only a quarter of the them to back down, we’re making significant progress. Little by little…. that’s how the Republicans got power… gradually… persistently. The difference is that we’ll plant the truth, not lies.

    BTW — I live in a farming area. Red state. People here know Frist is lying through his teeth. What they’re going to do about it in November, I couldn’t tell you, but there’s a shift it the wind — not towards Democrats but away from Republicans or just goddamn politicians…!

  • Third, when Frist noted that the estate tax “runs 40 to 50%” of an estate worth more than $1 million, he’s not only wrong about the dollar amount, he’s also wrong about how the tax is applied — it affects an estate’s value over and above $2 million, not the whole thing.

    I agree with your general point, but in this specific, you have misrepresented Frist, who said:

    until they got the ‘inheritance tax’ bill, which typically runs 40 to 50% of the current market value of a property in excess of $1 million.

    He clearly says that the tax is paid on only the amount that exceeds his incorrect dollar value. I think it would be a stronger post criticizing his misrepresentations if we don’t engage in any of our own.

  • Perhaps CB’s post was a little strong on this, but at best Frist’s actual words were ambiguous — not “clearly” correct as you suggest. Frist’s words could readily be interpreted to mean that in property exceeding $1 million in value, that tax is 40-50% of the current market value of that property. Nowhere does Frist expressly say that the tax is paid only on the overage, although his words can be read that way as well.

  • Boy, talk about misleading. Frist’s example here, and his use of the term “inheritance tax”, is extremely pernicious and devious.

    More than a few states impose their own transfer tax on assets in a decedent’s estate. This is a completely different tax than the federal estate tax. In Tennessee, it’s known as the inheritance tax.

    As mentioned, you pay no Federal estate tax if your estate is valued at $2 million or less. Why? The first $2 million is exempt from tax. Many states match this dollar for dollar – no state estate/inheritance tax if your estate is valued at $2 million or less.

    But not in Tennessee! Tennessee’s exempt amount is only $1 million. In other words, if you’re a resident of Tennesse, and if your estate is worth $2 million, you won’t pay any Federal estate tax. However, you will pay a state inheritance tax on the additional $1 million.

    Down in those parts, it’s known as the “Tennessee Gap“.

    This little anomaly is very well known to Tennessee estate planning lawyers.

    I’d wager and give odds that the example old Bill uses here involves the Tennessee inheritance tax, not the Federal estate tax.

  • It is also worth noting that if a single asset comprises more than 35% of the estate (as would certainly seem to be the case here) then the tax can be paid over a period of 14 years

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