Government Affairs

Op-ed by John F. Sturm
President and CEO, Newspaper Association of America

      The federal estate tax has many family-owned newspapers up against the ropes, and without some quick help from Congress these vibrant voices of the community are in danger of going down for the count.

     In 1910, there were 2,100 independently owned daily newspapers in the United States. The number has dropped to only about 300 today. One of the biggest contributors to the demise of independent newspapers is a punishing estate tax that consumes up to 60% of all assets at the time of an owner's death. In response to these crippling estate taxes, many are forced to liquidate their businesses and sell all or part of them.

     These scenes are repeated thousands of times a year in many industries, as this crushing tax brings a wide range of family-owned businesses to their knees. It is telling that 91% of all businesses in America are family-owned, and 90% of these businesses fail shortly after the death of the founder.

     A good example of this is The Tribune in Ames, Iowa, which was put on the market in September after the sudden death of one of its owners. With the grieving family facing a huge estate tax bill, the two remaining partners, Pulitzer Prize-winner Michael Gartner and newspaper veteran Gary Gerlach, were forced to sell The Tribune and all the other community papers and assets they owned.

     Hit particularly hard are women and minorities who are increasingly likely to become entrepreneurs and are often newly economically empowered.

     Estate taxes recently dealt a crippling blow to the Chicago Defender, one of the oldest African American-owned newspapers in the nation. After the death of publisher John Sengstacke, his heirs attempted to obtain the financing needed to pay the more than $3 million in estate taxes, while keeping the historic newspaper in the family. These efforts, however, were to no avail. The Chicago Defender, one of only two surviving daily black newspapers in the nation, will find its fate sealed by a closed auction at the end of January, ending nearly 100 years of family ownership.

     Newspapers are just one of the many family businesses that are being crippled by the estate tax. The estate tax is also hurting many of the industry's readers and advertisers, from car dealerships to travel agencies to local real estate companies.

     If family businesses, one of our country's greatest sources of jobs and creativity, are suffering such losses, who gains? The answer appears to be no one, with the exception of the accountants, tax attorneys and estate planners hired by families to manage their assets in ways to avoid the tax. That money could be better used investing in equipment, expanding business and creating more jobs.

     The irony is that the estate tax directly contradicts the fundamental principles that the United States supports: hard work, saving for the future, and fairness. Why use this onerous tax to penalize a person who works hard, pays taxes along the way and invests and saves money?

     If all this were not bad enough, the estate tax brings in less than one percent of total federal tax revenues, while enforcement costs the government 65 cents for every dollar received.

     Suffering from the estate tax runs deep and wide, which is why, according to the polling company^TM, 77% of the public would vote for a member of Congress who supported the repeal of the estate tax. Repeal is also supported by more than 100 business associations including such diverse groups as the National Black Chamber of Commerce, the National Indian Business Association, the National Hispanic Chamber of Commerce and the National Association of Women Business Owners.

     More than 230 Democrat and Republican House members have co-sponsored legislation phasing-out this tax, demonstrating that this issue has support across both sides of the aisle. A similar bipartisan effort is gaining support in the Senate. Congress and President Clinton have a historic opportunity to work together this year in a bipartisan fashion to reduce and eventually eliminate this unfair and unproductive tax. Family businesses are community resources too valuable to lose.

John F. Sturm is president and CEO of the 2,000 -member Newspaper Association of America, the newspaper industry's largest trade organization.