John Ed Anthony
Chairman of the Board, former President
Anthony Timberlands
P.O. Box 137
Bearden, AR 71720
Statement for the Record
U.S. Senate Finance Committee
Federal Estate Tax: Uncertainty in Planning Under the Current Law
November 14, 2007
Chairman Baucus, Ranking Member Grassley, and members of the Committee, it is an honor to present written testimony concerning the federal estate, or “death tax.” I am a third generation timberland owner and forest products producer. My family’s company, Anthony Timberlands, Inc. owns or manages 250,000 acres of timberland in the state of Arkansas, operates three lumber mills, a treating plant, and a laminating facility. We employ 750 full-time employees, plus hundreds of contractors. We are one of only two significant privately-held forest product companies in the state of Arkansas remaining where once there were twenty or more. My story is about how the death tax led to the demise of the other companies, and will lead to the ultimate sale of our company, if the tax is not repealed.
Anthony Timberlands was formed 100 years ago by my grandfather, Garland Anthony. He was a hard-worker and an innovative thinker. He introduced sustainable forestry techniques long before the concept became popular. While most forest operators of his era would clear-cut the land, he introduced the notion of only taking the mature trees so that the saplings and the younger trees could be preserved for later harvest. He initiated the practice of nurturing and protecting the forest, which remains our mantra to this day.
Because of his family’s hard work, over time Anthony Timberlands became a successful enterprise and gained respect throughout the nation. Today, we proudly carry on his tradition of hard work, innovation, and sustainable forest practices. It is our hope to pass the company and its 250,000 acres of timberlands and mills down to a fourth generation, now in place as President of our company and then to the fifth generation now in college preparing for a leadership role in our industry. Unfortunately, our company faces the same obstacle to survivability that has led to the sale and consolidation of many other private timber companies – the death tax.
As with most other timber companies, Anthony Timberlands does not have large cash reserves or other liquid assets, we call that being “land poor.” Although we have weathered the storm of paying huge death taxes with the passing of my father in 1961 at a young age and my grandfather in 1981 at age 97, when I die, or in anticipation of my death, it will be recognized that it will be impossible to pay the death tax yet again and have the company survive. No entity of consequence can survive when 50% of its assets are confiscated. Like all the other privately owned entities, my family will have no choice other than to seek a corporate buyer who, if the pattern seen so often repeats itself, will liquidate the forest we have grown and ultimately consolidate or close the mills. The employees of the company, the forest, and the local community, will never be the same once local ownership is removed.
Most timber companies are sold to one of the large corporations, such as Weyerhaeuser, Plum Creek or some institutional investor who does not have the long-term focus of a family owner. The wealth of the timberland base and mill, instead of being reinvested in the local region, is sent to the distant central headquarters. Once this happens, the mill communities begin to shrivel up and die. These corporate practices can be distinguished from those of the former local owners. Locally owned business and industry does not give up on its schools, churches, community or employees. Local industry does not outsource its production nor operate out of distant headquarters or bank in foreign cities. Those who own the local industry live and work in the towns where they operate, and support the same institutions as those who work in the plants.
The death tax is the driving force behind a trend we all despise. Rather than diverse and highly individualistic private business and industry, based in thousands of American towns and cities, we are seeing the basic fiber of our culture and society forced into the hands of a few multinational corporations. This is what the death tax does. I have seen local industry disappear time and time again with family-owned timberlands in Arkansas, and I fear that my family’s company – and the communities where our families have long lived and worked – will be next.
By this time in my life I have paid a fortune in life-insurance with the hope that it would protect my business from sale in the event that the death tax has not been repealed. However, I recognize that my death tax liability will far exceed my life insurance. For all that Congress likes to pontificate about the importance of protecting small business, repealing the death tax is the best way to do something about it. Congress feels that exempting $3-4 million in assets will save the family business. This is ludicrous when a substantial lumber mill has a cost of $40-50 million. A timberland base to support a mill might be valued at $100 million. A sudden tax liability of $50-$75 million is a death warrant for any private entity. Without repeal, in the fairly near term, there will be no privately owned industry of consequence left in America. Current tax policy mandates it. That is the simple fact of what the death tax does.
I ask the committee to quickly take up legislation to permanently repeal the death tax.
