4. Ethical Issues Case Method & Example in Agriculture/Environmental Problems

1. 4. Ethical Issues Case Method& Example in Agriculture/Environmental Problems Larry D. Sanders Spring 2002 Dept. of Ag Economics Oklahoma State University

2. INTRODUCTION • Purpose: • to understand how the case method is applied to an example of ethical issues in agriculture and the environment • Learning Objectives: 1. To review the case method outline and objectives. 2. To apply the method to an appropriate example. 3. To understand the generic applicability to a variety of issues. 4. To understand how “ethics sensitivity” enhances understanding of problem & many improve resolution.

3. Case Method: Outline for Lecture/Seminar • Introduction of Problem • Discussion of Problem • Discussion of Ethical Issues related to Problem • Suggested Resolution of issue with ethics considered • Homework assignment or in-class activity (answer key to instructor) • Class handouts --notes --key definitions --sample exam questions (answer key to instructor) --references (as appropriate)

4. Case Method:Example—Estate Taxation • Introduction of Problem A. The Problem --Many citizens feel it is unfair to tax property at death, especially in agriculture. As some say, “If I own it at my death, why can’t I pass it on to my heirs without them having to buy it again or sell off assets to pay Uncle Sam?” B. Key Current Alternatives 1. The status quo provides for an increase in the exemption phased in over a period of years. 2. The Bush Administration is proposing a total elimination of the so-called “death tax”. 3. Some have proposed a compromise.

5. Case Method:Example—Estate Taxation 2. Discussion of Problem A. Background/History 1. Tyranny of European landed aristocracy --State: Penn. 1825 --Federal: --Revenue Act of 1916 (to fund national emergencies) --1932-41 estate taxes increased --1976 estate/gift taxes united --1981, 1987, 1997 estate tax capped, then reduced 2. American democracy —equality/equity

6. Case Method:Example—Estate Taxation 2. Discussion of Problem A. Background/History (continued) 3. Current Data --$50 billion in estate taxes/year (estimates vary) --Top 1% (2.6-2.9 million) pay 80-90% of estate taxes ($40-45 bil. by some estimates) --Top 0.1% pay half of estate taxes --Farms account for less than 0.5% of taxable estate assets --Family-owned businesses/farms get special treatment in valuation at current use rather than market value, & possibly payment deferral (non-farm family-owned business not eligible for use valuation)

7. Case Method:Example—Estate Taxation 2. Discussion of Problem (continued) B. Recent/Current Actions 1. 1990s—increased exemption phased in (state & federal) --current $675,000 exemption increases to $1 million exemption for all estates by 2006 (unlimited amount exempted in transfer to spouse) --current $1.3 million exemption for family-owned businesses/farms

8. Case Method:Example—Estate Taxation 2. Discussion of Problem B. Recent/Current Actions (continued) 2. 2000 Presidential election--key part of debate --Bush wanted to eliminate “death tax” --Gore wanted to increase exemption ($5-10 million phased-in over 3-5 years) --GOP plan to increase exemption to $5 million 3. Bush Administration tax cut --plans to phase-out estate tax over period of years C. Rationale for key alternatives --Economic and/or Intrinsic

9. Case Method:Example—Estate Taxation 3. Discussion of Ethical Issues Related to Problem • Moral Justification • For Status Quo (or higher estate tax) --Land portion of assets is not for private holding/use; should be shared by all and or returned to nature --Ownership gives no rights beyond death • For Phase-down/elimination --Property rights are absolute and/or dispensed by God, not man --The work ethic justifies rewards for hard work &, by rights, land freely bought and paid for, should be used/sold/passed on at owner’s desire without impediment

10. Case Method:Example—Estate Taxation 3. Discussion of Ethical Issues Related to Problem (continued) B. Empirical Justification • For Status Quo --Recoups unpaid capital gains taxes --Fairness concept requires method to minimize wealth concentration --Progressive concept requires method for wealthier to pay more --Elimination of tax could be regressive if government needed to compensate for loss of revenue --May be a way to force wealthy to pay for loopholes • For Phase-down/elimination --Those who pay most should get the biggest tax cuts --The wealthier create wealth that spurs economy (trickle-down theory) --Gifting to charity may be higher --IRS expense to capture estate taxes may not justify the revenue

11. Case Method:Example—Estate Taxation 4. Suggested Resolution with Ethics Considered A. Problem/Issue Identified (public becomes aware) B. Problem defined --Include Science, Technology, Ethics, Policy C. Decision-Making Process --Include Science, Technology, Ethics, Policy D. Monitor & Evaluate 5. Homework 6. Notes/References/etc. --IRS studies --Institute for Taxation & Economic Policy --Congressional Research Service --The Oklahoma Observer