One of the components of George W. Bush’s tax relief plan was a repeal of the estate tax. While it initially looked to be an easy early victory, a campaign started a couple weeks ago by billionaires in favor of the estate tax gave Democrats and other opponents of the tax a temporary boost. The basic argument of the billionaires was that a) without the tax, rich people will leave their inheritance to their children which gives them an unfair advantage, and b) without the tax charitable giving will decline.
Perhaps in their next paid advertisements the billionaires will cite the plight of The Chicago Defender as the sort of thing that proves the wonders that can be had by the estate tax.
Earlier in the century, The Defender was the most popular black newspaper, period. Started in 1905 by RObert Abbott with a 25 cent investment and a 300 copy print run, The Defender was the premier black newspaper by World War I with a total readership of upwards of 500,000. For twenty years, Langston Hughes wrote a weekly column for the paper and it played an instrumental role in many of the social and political movements of its day. The paper was, for example, one of the primary advocates of the northern migration of blacks that occurred after World War I.
Abbott didn’t achieve that level of success without some powerful enemies. Because of its coverage of lynchings and other racially tinged issues, white distributors in the South refused to carry the newspaper. The KKK threatened anyone who dared cell the paper and occasionally tried to confiscate copies of the paper that made their way south.
Although the Defender doesn’t have the national impact it once did, today it does have a paid daily circulation of 230,000, making it the fourth largest daily paper in Chicago. Unfortunately it’s run into an enemy that might finally be able to do what the KKK couldn’t: shut The Defender down. The latest enemy is the Internal Revenue Service.
Abbott’s nephew, John Sengstacke, took over publication of the paper. Sengstacke expanded the reach of his uncle’s news empire by buying several other black newspapers. In addition Sengstacke founded the National Negro Publishers Association which is now known as the National Newspaper Publishers Association. But despite all his good works Sengstacke committed the one unforgivable sin in the eyes of the IRS — he died.
Because he died and because The Defender was completely privately owned. At his death Sengstacke’s estate was worth about $10 million, and the IRS wants his heirs to pay a $4 million inheritance tax. Sengstacke’s family would like to keep the newspaper business within the family, but the only way it could meet the $4 million bill the IRS has socked it with would be to sell the paper.
Conservative News Service reports that the family has tried to reach a compromise with the IRS for a deferred tax payment plan which would allow the family to keep the paper and pay the taxes gradually, but the IRS is insisting that they pay the full amount.
This is the reality of the death tax. People who started with nothing and build up relatively modest estates compared to the billionaires who so love the tax end up being unable to keep the small business they created within their families. Instead privately owned papers end up in the hands of large corporations who have the advantage of never dying.
The billionaires in favor of the death tax are essentially arguing that at death every successful small businessman such as Sengstacke should be required to liquidate his assets or else waste hundreds of thousands of dollars on lawyers who can set up foundations and other arrangements that avoid the estate tax penalty but still leave heirs in control of their wealth (this is how, for example, the heirs to Henry Ford maintained control over the Ford Motor Company without having to pay exorbitant death taxes).
It is simply not the government’s role to determine how the wealth of dead people could be best allocated. That role is best left to those who actually earned said wealth. The estate tax should be repealed.
Legendary black-owned newspaper threatened by death tax. Gene J. Koprowski, Conservative News Service, February 22, 2001.
The Chicago Defender. PBS, No Date Given.