Rethink taxation wisdom

The Democratic members of Congress who recently voted against permanent repeal of the estate tax have it all upside down.

Their vote against permanent repeal was anti-small business, anti-family business and ultimately anti-worker. Their vote was in favor of big corporate America, the Bar Association of America and the insurance industry, all of whom lobbied to keep the estate tax in place.

The estate tax should be permanently repealed. If it is not, the only real losers will be working class Americans and the locally owned family businesses that employ them.

Our company, Hancock Lumber, is a good potential example. Hancock Lumber is a sixth generation family business founded in 1848. Hancock Lumber and our sister company, Hancock Land, own timberlands, sawmills and retail lumberyards in Maine. Each business is very capital intensive. To the extent our family has wealth it is in the assets of the business. Our “wealth”, if you want to call it that, is in forestland, standing timber, sawmill machinery, delivery vehicles, inventory and receivables. Our “wealth” is in non-cash, highly illiquid business assets. For six generations we have chosen to keep those assets invested in Maine through our business. As it stands today, however, should my mom pass away in the year 2011, the Democratic leadership in Congress (including Tom Allen and John Baldacci) want 55 percent of the value of our company to get turned into cash and sent to the federal government. This is confiscatory, counterproductive and wrong.

Hancock Lumber pays approximately 40 percent of its profit annually in taxes. In addition, we pay Social Security taxes, Medicare taxes, unemployment taxes, gasoline taxes, property taxes and excise taxes. Then, on top on that, the Democratic leadership in Congress want 55 percent of the value of Hancock Lumber in the form of an estate tax every time a generation of our family dies. It takes 80 years to grow a pine tree on our land. In the life cycle of one crop of trees we could be forced to pay 55 percent of the value of our working forest as many as two times as generations of our family die.

In the Hancock Lumber example, the estate tax’s inefficient and counterproductive redistribution of wealth is clearly exposed. Is their anyone in Maine who truly believes that our great state and country will be a better place if 55 percent of the value of Hancock Lumber’s timberlands, sawmill equipment and delivery vehicles are liquidated and sent to Washington just because my mom passed away? Estate tax elimination for family business assets is entirely about this simple question. To me, the answer is painfully obvious.

Therefore, it is frustrating to see our elected officials in Washington fail to act. Some Republicans use this issue to embarrass Democrats. Many Democrats use this issue as a poster child in their misguided but never ending “class warfare” rhetoric. Meanwhile, the pending reality of the estate tax crisis continues on for America’s family owned businesses. The current stalemate in Congress is particularly upsetting because over 50 percent of the members of both the House and Senate voted for permanent repeal. A procedural rule requiring a 60 percent vote in the Senate allowed a minority of anti-family business Democrats (under great pressure from Tom Daschle) to block it.

The bottom line of this debate is that Democratic leadership in Congress is wrong on the subject of estate tax repeal. Maine and America will not be a better place if Hancock Lumber pays 55 percent of the value of our business assets to the federal government when my mom dies. Maine and America will be a better place if Hancock Lumber (and the thousands of other family businesses in our country like it) continues to create jobs and support our local community beyond the life cycle of any single generation of our family. The Democratic leadership in Congress, including Tom Allen and John Baldacci, has this issue upside down. Their position is anti-small business, anti-community based business and therefore anti-Maine. They will be the first to say that they are champions of small business and working class America. The truth is, on this all-important issue, they aren’t.

Kevin Hancock is chairman, president and chief executive officer of Hancock Lumber.