Daily Archives: July 27, 2010

NJPP Monday Minute 7/26/10: What do BEIP, estate taxes and a candy company have in common?

The Mars family.

Mars North America’s sales in 2008 were $30 billion and Jacqueline Mars is the richest person in New Jersey, according to Forbes.com. Her net worth is estimated at $11 billion. According to the Center for Responsive Politics, the Mars family has poured millions into lobbying on taxes as well as other issues.

In June, the New Jersey Economic Development Authority approved a Business Employment Incentive Program (BEIP) grant of nearly $500,000 to a subsidiary of Mars North America – the major candy company. This was a reward for bringing 36 jobs paying an average of $80,000 per job from Nevada to New Jersey. These new jobs would be located in Mount Olive, New Jersey, just north of Bedminster where Jacqueline Mars, co-owner of the company, lives.

The Mars family also wants to be rewarded for their wealth by having the federal estate tax eliminated. Jacqueline Mars and her brothers, Forrest Jr. and John, have been part of an effort by super-rich families to gut the federal estate tax for at least eight of the last 12 years, according to United for a Fair Economy (UFE) and Public Citizen’s 2006 report on these families, Spending Millions to Save Billions. Other like-minded individuals include the families who own Wal-Mart, Nordstrom’s and Gallo Wines.

The fight over the shape of the federal estate tax has been raging for years. And if you are very wealthy, this is a good year to die because heirs get every cent of the family wealth instead of sharing it with the government. By dying this year, George Steinbrenner’s heirs will inherit an additional $450 million (assuming 2009 rules).

In 2001, President Bush championed a 10 year phase-out of the tax that culminated in the elimination of the federal estate tax in 2010, then the return of the tax to pre-2001 levels in 2011.

Only the wealthy pay this tax. Under the Bush estate tax phase-out, in 2009, the first $7 million for a couple ($3.5 million for an individual) is exempt from the tax. An individual with between $3 million and $7 million in assets is wealthy – not middle class. That’s just common sense, but those who want to kill the tax cloud the debate with claims that it hurts the middle class, family farms and small businesses.

According to United Fair Economy, only two in a thousand people paid the estate tax in 2009. Lee Farris of UFE further explained in a point-counterpoint with the conservative Heritage Foundation that, “in 2009, two children of a wealthy couple could each inherit more, tax free, than the average American earns in two lifetimes. But unlike the lucky heirs who won the genetic lottery, these Main Street workers will be paying taxes on all of their earnings.” Also, the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution, found that under 2009 rules, only 110 small businesses and farms in the whole country would have to pay the estate tax. And almost all would have enough cash assets to pay the tax.

What is the connection with the states? Prior to the 2001 federal estate tax cut, every state levied an estate tax tied to the federal estate tax. In addition, some states levy a separate state inheritance tax. The state-level taxes that were tied to the federal tax code are called “pick-up taxes” because these allow the states to pick up part of the tax revenue that would have been paid to the feds through an estate tax credit. The Center on Budget and Policy Priorities explains that these state estate taxes did not increase total estate tax liability because estates received this dollar-for-dollar credit that reduced federal taxes owed by the amount paid to the state.

In 2006, Jacqueline’s brothers who live in McLean, Virginia, spent $180,000 lobbying the Virginia legislature to eliminate the state’s estate tax, according to a September 27, 2007 article in The Roanoke Times. They were successful and each brother saved an estimated $1.6 billion in estate taxes they would have paid to Virginia upon their death.

Unlike Virginia, New Jersey and 21 other states continue to tax inheritances. Many of these states, including New Jersey, made the financially sensible move to decouple from the 2001 tax cut changes and continue their pick-up tax, rather than cutting essential services for residents.

In the fall, Congress will continue to debate what shape the estate tax will take after this year where no federal estate tax exists. It is the least well off in New Jersey and around the country who need help – not the wealthiest corporations and individuals.

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Filed under estate tax, George Steinbrenner, Mars Candy, New Jersey Economic Development Authority, New Jersey Policy Perspective, The Center on Budget and Policy Priorities, The Mars family