Kevin Kester works dawn to dusk, drives a
12-year-old pick-up truck and earns less than a
typical bureaucrat in Washington D.C., yet the
federal government considers him rich enough to pay
the estate tax -- also known as the "death tax."
And with that tax set to soar at the beginning of
2013 without some kind of intervention from
Congress, farmers and ranchers like Kester are
"There is no way financially my kids can pay what
the IRS is going to demand from them nine months
after death and keep this ranch intact for their
generation and future generations," said Kester, of
the Bear Valley Ranch in Central California.
Two decades ago, Kester paid the IRS $2 million when
he inherited a 22,000-acre cattle ranch from his
grandfather. Come January, the tax burden on his
children will be more than $13 million.
For supporters of a high estate tax, which is
imposed on somebody's estate after death, Kester is
the kind of person they rarely mention. He doesn't
own a mansion. He's not the CEO of a multi-national.
But because of his line of work, he owns a lot of
property that would be subject to a lot of tax.
"Our number one goal is to repeal the estate tax, to
get rid of it, not have it for every generation,
when I die and my kids die and so on," he told Fox
News. "For everyone to have to re-purchase the ranch
or farm over and over for each generation, that's
inherently unjust. So what we're doing is asking our
politicians to understand that and repeal the estate
That, however, is unlikely. Currently, the federal
government taxes estates worth $5 million dollars
and up at 35 percent. When the Bush-era tax rates
expire in January, rates increase to 55 percent on
estates of $1 million or more. While some
Republicans want to eliminate the death tax
entirely, President Obama has proposed a 45 percent
rate on estates of $3.5 million and up.
"The idea behind the estate tax is to prevent the
very wealthy among us from accumulating vast
fortunes that they can pass along to the next
generation," said Patrick Lester, director of
Federal Fiscal Policy with the progressive think
tank -- OMB Watch. "The poster child for the estate
tax is Paris Hilton -- the celebrity and hotel
heiress. That's who this is targeted at, not
But according to the American Farm Bureau, up to 97
percent of American farms and ranches will be
subject to an estate tax where the exemption is set
at $1 million. At that rate, the federal government
will pocket $40 billion in 2013 and up to $86
billion in 2021. That contrasts with just $12
billion this year.
Many Democrats argue the tax promotes equality among
classes, especially in capital gains -- or stocks
passed from one generation to another. Since stocks
are only taxed when they are sold, the government
can't profit from long-term investments without the
"Very large portions of very wealthy estates are
tied up in stocks and they have never been taxed,"
said Lester. "The estate tax is one of the ways we
make sure the wealthy pay a little bit more as an
overall share of their wealth and income compared to
Many Republicans argue the opposite. Because the
estate tax falls on assets, they say it hampers
investment by reducing incentives to save and
invest. A pending estate tax could become a
disincentive to invest in an otherwise viable
business, forcing older people to liquidate or shift
resources out of an ongoing business and into a
trust or tax-free investment.
"We're not millionaires in the terms of making a
million dollars a year," said Kester who lives in a
modest home and whose family -- not outsiders or a
corporation -- runs his ranch. "I have a
half-a-million dollars in soil."
Kester can't spend it, without selling land. But by selling the land, each year the ranch would become less viable.
The estate tax dates back to 1916 when
then-President Woodrow Wilson imposed the tax of 1
to 10 percent on the wealthy because World War I
reduced federal government revenues. Under Franklin
Delano Roosevelt, the tax rose to 77 percent, as
Congress tried to prevent wealth from becoming
concentrated among a few powerful and super-rich
Ironically, many nations historically more concerned with class and wealth -- namely Russia and China -- have since abandoned their estate taxes.