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I-920 affects about 210 a year

Washington voters are being asked this fall to repeal a tax that very, very few residents - or their relatives - ever will pay.

The tax in question is the estate tax, and it will hit an estimated 210 Washington estates this year. That's a tiny fraction of the more than 45,000 people expected to die, according to state Department of Revenue data. The tax puts about $100 million a year into public schools and college enrollment slots.

Initiative 920 would repeal the tax, along with the revenue for schools, which has prompted a costly fight by the state's teacher union and tax-fairness advocates to retain the tax.

The leading supporters of I-920 include ultra-conservative tax activist Dennis Falk of Fox Island and two major business associations. So far, the pro-I-920 campaign is funded heavily by donations from a Seattle developer, Martin Selig, who put in $840,000 to help get the measure qualified for the Nov. 7 ballot using paid signature-gatherers.

"Death should not be a taxable event," says Selig, who also spent heavily in a bid two years ago to stop Seattle's monorail. He is pitching in this time, he said last week, because he considers the estate tax "a huge disincentive to entrepreneurship," and he's still deciding whether to put more money into the campaign.

In some of his more stinging campaign claims, Falk has said the estate tax is government "picking the deceased's financial bones."

Once I-920 qualified for the ballot, two state business groups, the Association of Washington Business and National Federation of Independent Business, formed a "second front" campaign to push for I-920. The latter groups said the estate tax kills off small ­family-held businesses that struggle in their passage from one generation to the next.

But opponents of I-920 are fighting hard to save the tax after years of seeing money for education programs slip away.

The spokesman for No on 920, Sandeep Kaushik, says the estate tax is one of the few progressive taxes left in Washington's tax system, hitting those most able to pay - in this case people picking up inheritances worth multiple millions of dollars. Moreover, No on 920 backers cite state Revenue Department statistics showing the tax is not severe - averaging $40,000 on the 105 estates expected to fall this year in the $2 million to $3 million range.

And, the No on 920 forces note, fewer than 1 in 200 deaths in Washington will trigger the tax in 2006, and family farm assets are exempt.

Education opposition

The Washington Education Association and its national affiliate have contributed $600,000 altogether to oppose the initiative, arguing that the $100 million a year generated by the estate tax is badly needed money that likely won't be replaced by the Legislature if I-920 passes.

"The class size initiative that was passed a few years ago at that time didn't have a dedicated funding source, but (Gov. Chris) Gregoire has tied it to this," said David Johnston, an English teacher at Capital High School in Olympia and president of the Olympia Education Association. The tax money "has had a huge effect in the Olympia School District, especially in the primary grades."

Teachers now get a half-dozen extra hours a year for staff development, training and collaborating, all part of what he called "coming up with a better mousetrap" for teaching. And extra teachers are hired when enrollment balloons, keeping class sizes more manageable, he said.

But if I-920 passes, Johnston said, the money would go away and lawmakers cannot be trusted to replace it from other sources.

The WEA has similar arguments. "It's money for class size for students and enrollments for higher education. It's not unlikely there will be significant, large last-minute contributions from proponents and we need to be ready for that," WEA president Charles Hasse said. "We need to make sure we define the issue properly - that people understand only the richest one-half of one percent of Washingtonians are affected by this tax."

Carolyn Logue, state director for the National Federation of Independent Business and a leader in the Yes on 920 campaign, said that's not a fair argument, because a small group is being asked to shoulder a social cost that benefits society broadly. She said it would be better to get rid of the tax and come back to talk about reforms to the tax system.

Logue also noted that the state has given monstrously large tax breaks to select businesses, including $3 billion to the Boeing Co. alone in 2003. "Take a few hundred million back. That could have funded education," Logue said, noting that the estate tax does not affect firms like Boeing. "I'm saying it's disingenuous for these big corporations to say education should be better funded, yet so many of them are lobbying for tax breaks."

Leniency in paying

One campaign dispute is whether the current law gives businesses enough leeway on paying taxes.

The Department of Revenue allows a five-year deferral of estate taxes - with only interest payments due - if one-third or more of the estate is made up of a closely held business. And then the heirs have 10 more years to finish paying off the tax in installments.

To estate tax supporters, that's plenty of time for a well-run business to pay its taxes.

But to Logue of the NFIB, that's no answer for a "small business that's trying to pass it along to the kids. … To say you can be in debt to the government for 15 years, that's not very comforting."

A related dispute is whether many businesses are affected. Logue contends the estate tax - federal and state combined - kills family-owned businesses or forces their premature sales.

But the Department of Revenue says that just 15 percent of estates have closely held business assets. That works out to about 32 estates this year - of which 25 had less than half of the assets tied up in the business.

Disputed claims

Another disputed claim is whether businesses really are killed off by the taxes or if it's by other factors such as having heirs ill-suited to take over.

But after the I-920 campaign issued a short list of companies supposedly harmed by the estate tax, the former owners of one Washington business on the list - the Ben Bridge Jewelers chain - said the claim was false.

Moreover, father Herb Bridge and son Jon Bridge said they support having an estate tax as a leveling effect on wealth in society - an argument often pitched by wealthier supporters of the estate tax such as Bill Gates Sr. of Seattle.

"It's not a death tax. It is an estate tax. It's like having a gift tax. We should be looking at this as a way of providing a more equal footing for everyone to exist in society," said Jon Bridge, whose wife Bobbe is a state Supreme Court justice.

Bridge said he thinks that part of a person's great wealth should be given back. "Do we want an American aristocracy? If so, then this (I-920) is the perfect piece of legislation to make a start," he said.

Father Herb Bridge, 81, also disputed the idea that the estate tax motivated the sale of their business. "Originally I was impressed by the idea it was a discriminating tax. I've come to the conclusion it really wasn't. … Selling the company was a really good deal and wasn't really based on the taxation," he said, describing careful moves made 30 years ago to start transferring the assets.

Logue countered that some of the Bridges changed their views after the company was sold to Berkshire Hathaway.

Brad Shannon is political editor for The Olympian. He can be reached at 360-753-1688 or bshannon@theolympian.com.

MONEY AND I-920:

Two political action committees are supporting I-920's repeal of the estate tax, according to records at the state Public Disclosure Commission:

** The Committee to Abolish the Estate Tax raised $1.22 million, according to data on file as of Oct. 11 at the PDC. Donors included Seattle developer Martin Selig, $839,825; John Nordstrom of the department-store family, $75,000; Donald Root, GM Nameplate, $4,000; Steve Hanson, Hanson Motors, Olympia, $950.

** Yes on 920 raised $211,456 cash and in-kind aid, including $25,000 from Port Blakely Tree Farms, Tumwater; $25,000 from The Wenatchee World; $25,000 from Pioneer Newspaper Service.

One group formed against I-920:

** No on 920 has raised $1.03 million, according to data on file Oct. 11 at the PDC. Donors included the National Education Association, $500,000; Bill Gates of Microsoft, $160,000; Washington Education Association, $100,000; Service Employees International Union, Washington, D.C., $100,000; SEIU State Council, Seattle, $50,00; William Gates Sr., $15,000.

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