The big guys try to write their own bonanza
By Steve Lilienthal
web posted November 17, 2003
Letters were placed in the mailbox earlier this month addressed to two important
legislators notifying them that over twenty Members of Congress are concerned
about a provision in the Senate version of the faith-based initiative. If
you are a private property owner, then you have good reason to be concerned
about what is coming to be known as the Land Trust Tax
Favoritism proposal.
Among the signers are recognizable conservative legislators such as Wally Herger (R-CA) and Richard Pombo (R-CA) who would probably be whole-hearted supporters of the faith-based tax proposal if not for this attempt to wrangle a special deal.
Their letter cites their significant concern about the Senate's version of the faith-based initiative because it cuts the deck in favor of land trusts and government agencies at the expense of the average property owner.
Here's what has happened.
Large land trusts and their influential allies in Washington's political establishment have pushed for the inclusion of a significant tax break in their favor when privately owned land is being sold. The House version -- H.R. 7 -- the Charitable Giving Act -- does not include the special break, but the Senate version -- S. 476 -- the CARE Act of 2003 -- does.
If the Senate version is included in the bill that will be sent to President Bush's desk, a capital gains tax reduction of 25 per cent will be provided to sellers of land or water rights only if they sell to large land trusts or government agencies.
Therefore, without this tax break, the seller of a parcel of land valued at $500,000 would put his land on the market and receive offers for land at that price. If this provision takes effect, the average buyer would end up paying $500,000 and the property owner selling the land would have to pay taxes on the transaction. With the provision, however, he receives a 25 per cent capital gains tax reduction on the $500,000 transaction provided that he sells to a land trust or government agency even though they do not perform charitable acts.
Even if he wants to sell to the local church or just to a friend, if the Land Trust Tax Favoritism proposal is passed, the deck will be stacked in favor of selling to the Big Land Trust or the agencies of the Federal government.
When the congressional Joint Committee on Taxation examined the impact of the land trust provision in its May 12th analysis of the CARE bill, its analysis determined that the provision would reduce revenue for the federal government by hundreds of millions of dollars over a ten year period.
This provision draws opposition from Members of Congress in Western states
given that the Federal government already owns 36 per cent of the land and
this can only lead to taking more land off the property tax rolls. The result
of this provision, should it be enacted, is likely to lead to further hikes
in property taxes to compensate for the resulting attrition of taxable land
or reductions in public services. As the letter signed by the Members of
Congress makes clear the impact of this provision may very well be felt throughout
our agricultural sector: "The Senate provision places a premium on selling
farms and ranches to non-farm organizations, thereby discouraging our young
people from entering into agriculture and reducing competition for land.
With reduced competition for property, the landowner loses."
But the opponents of the Senate provision also find fault with it for cutting
the deck in favor of a large land trust like the Nature Conservancy with
its $3.2 billion in assets and an annual budget of $740 million. Dealt
out of the deal are the very faith-based institutions that are supposed
to be helped by the faith-based initiative -- churches, orphanages, and
religious schools.
Machinations by Senate Minority Leader Tom Daschle (D-SD) have held up negotiations over the reconciliation of the language in the two bills.
Representative Wally Herger (R-CA) explains why he does not believe the Land Trust provision should be in the final version of the faith-based bill: "It defies reason that Congress would make it easier for the government and radical environmentalists to lock away even more land. Private property encroachment and resources neglect is the poor record that stands against these types of ill-conceived incentives. This provision is exactly contrary to the purpose of the bill itself, namely to benefit nonprofit faith-based groups like schools and charities."
From the standpoint of protecting constitutional liberties --which includes the right of property owners -- the Land Trust Tax Favoritism proposal sets a disturbing precedent.
If this were the "Big Land Trust Tax Favoritism Act" then it would be an accurately labeled piece of legislation, not a special break being piggybacked on legislation to help institutions and group that are supposed to be the charitable equivalent of the mom and pop store.
When a bill supposed to help the little guy becomes a giveaway to the big boys, someone should blow the whistle!
Fortunately, it's been spotted, the whistle has been blown, but will the public outcry be enough to stop it?
That's a question worth asking and the wrong answer could end up costing
taxpayers hundreds of millions dollars. 
Steve Lilienthal is director of the Center for Privacy and Technology Policy.
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