Informed Speculation

A couple of weeks ago, Jeffrey Birnbaum of the Washington Post did a feature on one man who is struggling against the destruction of his small business that looms because of the state tax:

Whenever the chief executive of a big shareholder-owned auto retailer sees Jack Fitzgerald, he goes out of his way to say hello. But Fitzgerald, owner of Bethesda-based Fitzgerald Auto Malls, knows that the guy is not just being nice. He wants to sweet-talk Fitzgerald into selling his thriving business, which Fitzgerald does not want to do.

But he may have no choice. Fitzgerald’s 40-year-old chain, which operates dealerships in Maryland, Pennsylvania and Florida, is too large for him to pass easily to his heirs without their being crushed by the estate tax. As a result, Fitzgerald, 70, has become a part-time lobbyist, meeting with members of Congress and peddling his own version of estate-tax repeal.

Fitzgerald, who is a wealthy man, isn’t worried about himself, or even his family, exclusively; he also worries about his employees:

“These people are important to me,” he said. “I don’t want putting a lot of them out of work on my conscience.”

Fitzgerald has always run his business like an extended family and has never laid off an employee. Many of his top executives have been with him their entire careers and their children are on the same path. Harold Redden, a vice president, started as a floor sweeper 32 years ago. Now he has two sons in the business. Garry Jenkins, an executive vice president with the same length of service, also has two sons in the company. A few longtime employees have grandchildren on the payroll.

“That’s what makes this place special,” Fitzgerald said. “It’s a compliment to us when they want to bring sons or daughters or cousins into the business.”

But Fitzgerald does more than tug at the heartstrings. He also makes a compelling case against the estate tax on policy grounds. He notes that privately owned businesses like his are the nation’s most effective engines for economic growth and job creation. Yet the estate tax has for years forced owners to sell to corporate giants, which often stifles innovation, expansion and good feelings between workers and their bosses.

And he’s got an answer, maybe, or at the very least, a starting point for dialogue:

Fitzgerald wants to pay his estate tax “in advance.” He has calculated a series of surtax rates that, if applied to people at various levels of income, would replace the revenue generated by the estate tax each year. He said he is more than willing to pay what he owes through such a method rather than saddle his family with the entire burden when he dies. 

Of course, Fitzgerald is not a policymaker – but it does serve as a reminder that an estate tax repeal need not necessarily translate into a loss of revenue…