Death, taxes, and The Seattle Times

Publisher Frank Blethen is on a crusade to keep his paper in the family.

Earlier this month, Seattle Times publisher Frank Blethen announced that he had hired a new "director of external affairs" to represent his company's interests on government and regulatory issues. And what would be this new hire's top area of concern? Would it be threats to the First Amendment, perhaps? Copyright law in the digital age? Liability issues arising from the inaccuracies of Jean Godden?

No, the paper said; the new lobbyist's top priority will be "repeal of the national estate tax." Blethen wants to do away with this tax—which applies to only the wealthiest 1 or 2 percent of people in the country—because he believes it is one of the biggest threats to the survival of family-owned newspapers.

Blethen, who is the fourth generation of his family to run the Times (and is hoping to groom a fifth), has become one of the country's main activists in the drive to bury the estate tax. He has been personally lobbying members of Washington state's Congressional delegation on the issue. He organized a meeting in DC last May which brought together a couple dozen business organizations, such as the US Chamber of Commerce, to help "educate" elected leaders. In true Times spirit, he has tried to play the "diversity" card, actively recruiting minority and women business owners to take a visible stand against the tax. He has also taken advantage of his own control of the printing press by publishing ads in the Times calling for an end to the "death tax."

These efforts appear to be bearing fruit. This summer, thanks to a bill sponsored by Bellevue Republican Jennifer Dunn, both houses of Congress agreed for the first time to eliminate the estate tax. Dunn's plan for a 10-year phase-out was included in the huge tax-cut measure that is now on President Clinton's desk (where it will soon be vetoed).

Elimination of the tax would save Blethen's heirs millions of dollars. But Blethen says this campaign is not about enriching his children. "If it was financial benefit I wanted for them, we would sell this puppy [the Times] in a heartbeat and make them wealthy beyond their dreams," he says in an interview at his office. Rather, he says, "My whole career is based on perpetuating a multi-generation family-owned business."

Many experts who have looked at national data do not believe that the estate tax has led to widespread shuttering of family businesses. But Blethen insists that the tax is precisely what has led to the consolidation of the newspaper business into a world of giant chains. "I've been talking to family-owned newspapers my entire life," he says, "and the number one reason family newspapers have sold is because of the death tax."

Most people never have to pay estate taxes, but for the fraction who do, the tax rates are quite high, starting at 18 percent and climbing to 55 percent for estates worth over $10 million. To cover those taxes, children sometimes have to sell off family goods. This is especially common when the children inherit a family business, since the value of the estate may lie mostly in fixed assets, like land and equipment, which carry a high value but do not necessarily generate a lot of cash. Jill Mackie, Blethen's new external affairs director, says this is a common problem in industries like cattle raising and tree farming.

Blethen, who is 53, says there is no risk of the Times being sold to cover estate taxes. But he notes that, like other business owners, he has had to take elaborate—and potentially destructive—steps to draw down the future size of his estate. For example, he started distributing stock to his children before they were even five years old.

"You have to do all sorts of gifting years in advance," he says, "years before you know what your heirs are going to be like as people, whether they're going to be responsible, if they're going to be interested in the business." As a result, ownership of the Seattle Times Company is now dispersed among 11 different kids in the family's fifth generation, which creates tremendous potential for conflict in the future.

"Given the choice, I would not have done these things," says Blethen. He argues that the estate tax puts family-owned businesses at a disadvantage compared with giant publicly owned corporations. "It's not effective and it's not fair," he says.

Of course, taxes are always an inconvenience to somebody. Blethen showed no such concern for the fairness issue when he was supporting the imposition of a special restaurant/bar tax in King County to pay for the new baseball stadium—a tax that hits mom-and-pop coffee shops a lot harder than Planet Hollywood. Nor can the Seattle Times be heard calling for an end to property taxes, even though that tax continually disrupts the lives of people of modest means, forcing them to sell off their homes and leave neighborhoods because the property values have become too high.

Meade Emory, a law professor at the University of Washington, contends that completely doing away with the estate tax "would be an unconscionable and unjustified boon to the very, very rich, something neither they nor this country needs." He thinks current law could be amended to help prevent the occasional "fire sale" of family businesses.

Emory has also raised questions about the propriety of a newspaper publisher lobbying so aggressively for legislation that is of direct financial benefit to his family. Emory argues that Blethen's activities put our Congressional delegation, who are in need of endorsements, "under incredible pressure." Other critics have suggested that Blethen has compromised the editorial integrity of his paper by publishing the death tax ads and associating the Seattle Times name so closely with his cause.

But Blethen makes no apologies, saying, "I'm always very up-front about what my agenda is. There are no secrets." And he notes that other publishing executives frequently lobby on public policy issues that touch their financial interest—such as loosening up the rules governing media ownership—and no one appears to object.

Brian Baird, a 3rd District House member and one of just a few Democrats who supported the estate tax repeal, says he saw nothing wrong with Blethen's maneuvering. "The fact that a person is in the media should not by itself prevent them from expressing their views just as any businessperson does," says Baird. "No one asks if a dairy farmer should be allowed to talk to a Congressman."

Ultimately, the survival of The Seattle Times as a family-owned company is probably far less dependent on the question of estate taxes than on whether anyone among the next generation of Blethens has the interest or ability to take over, as opposed to simply cashing out. (Just two of these Blethens currently work at the paper: Trace, 23, is a financial analyst, and Rob, 27, is a classified customer sales manager.) Earlier this summer, for instance, the heirs of the De Young family, owners of the San Francisco Chronicle, tired of the business and sold out to Hearst. "Most sales take place because the kids don't want to come back and work for Dad's envelope company," says Emory.

 
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