The estate tax went to 40 percent with a $5 million exemption after the fiscal cliff “deal.” My wife and I, like countless other business owners, scrambled to finalize additional so called “estate planning” before year’s end. It was all a bunch of economically irrational transactions except for the death tax. And I am pissed off about it.
Back in 1978, I started my company with a little 100-seat restaurant in Iowa. I didn’t have family money, so I worked (I’m not asking for your sympathy) day and night, seven days a week and I lived very frugally. My home until I was 35 was a $300-a-month house populated with a bed and a few chairs. Any money my little company made went straight back into the company. I paid myself only what I needed to live. At one point the federal government fined me for paying myself too little on the theory that I was avoiding payroll taxes! I have personally guaranteed every bank loan, so I could have been on the street if I made bad decisions. I took many entrepreneurial risks.
My wife was my first accountant. We have built the company together for 35 years. She has worked very hard as well. Again, I am not asking for your sympathy.
We are now, by most people’s perspectives, rich. But since we still owe the banks a lot of money my company is not our personal piggy bank. The banks believe, and rightly so, they have priority on the cash flow. We now live very well by Iowa standards (although not, perhaps, by Manhattan standards). And I have to admit, I do not feel guilty about that at all. Perhaps if I had invented some Internet product at 23 and flipped it in a couple of years for hundreds of millions, I might experience a little guilt about my overnight good fortune. But like most business owners, it was slow, tedious, and often tough. Again, no sympathy asked; it was my choice as a free person in a free land, so I thought.
So I want to ask President Obama and the political establishment a simple question: Why do you think the federal government should get almost half of everything my wife and I built when we die?
One of the hotels we own in Iowa has 137 rooms, a small restaurant, and some meeting space. Its value is about $20 million. Now let’s pretend it is the only thing we own and it is debt-free when Kim and I both die. Mr. President, can you tell me why, in the “Land of the Free,” my “estate” should send Uncle Sam 40 percent of the $15 million (after the $5 million exemption), assuming no change in the current law? Does that level of wealth passing to my kids or to charities threaten your vision of the Republic? Do you really believe that this is our “fair share”? Do you think that this violates some perverse concept of social justice when we have corporations that make that much in a single hour? Or rather is it a sick and wrong institutional expression of envy backed by force unworthy of this great land? Remember, this is 40 percent of the after-income-tax dollars. The way I figure, that means ultimately the federal government gets 64 cents of an earned dollar and ultimately my heirs get 36 cents.
I want a straightforward answer to this question based on my single hotel example. Do not reply with ambiguous notions of the dangers of concentrations of wealth or creating Paris Hiltons. I think it comes down to despicable envy and the undiluted power to confiscate. When the king can ultimately confiscate almost two-thirds of your things as you live and when you die, it is medieval Europe. This is not progress beyond pharaohs, dukes and kings. This is not America the Land of the Free.
Whalen is the Founder, President and CEO of Heart of America Group.