I fired another shot at the effort to repeal the Estate Tax again in the middle of the blog "Missing A Few Rungs On The Corporate Ladder" and everyone should read the eloquent and passionate shot a fellow by the name of Costikyan Jarvis fired back at me in the comments section. He is apparently the next in line to be the big kahuna at Jarvis Cutting Tool in New Hampshire – you can click here to see what Jarvis is all about – and to take a look at Costikyan. I presume the guy next to him – Marshall Jarvis – is the one whose estate we are worrying about here since he looks a little older.
A couple of quick, personal comments: First, it is clear from the picture that Costikyan Jarvis is an intelligent, good looking guy. (I have a personal stake in convincing the world that follicle deficiency is a solid indicator of intelligence and that all such guys are, of course, good looking). His opinion is quite valid and should be taken seriously. Second, if my guess that Marshall Jarvis is the one whose impending death will toss Jarvis Cutting Tool into the hands of the tax man, Marshall should be a little worried, if not peeved at Costikyan. Marshall looks pretty healthy to me and I know that I am not pleased at the thought of my sons spending a lot of time and energy planning my death.
Also, I should point out that Jarvis Cutting Tool is obviously a first class outfit and has been well run since 1901. At the recent Lean Accounting Summit, Dr. Tom Johnson said it is easy to spot an ‘advanced manufacturer" in America – any manufacturer still in business in America’s business climate is, by definition, an advanced manufacturer. He is right. Jarvis has been doing things right for 104 years and the thousands of stakeholders involved for that century have been fortunate to have had the Jarvis family around.
And another note – since the name of the company is ‘Jarvis’ and Costikyan’s name is ‘Jarvis’, unless there have been some funny things going on at the family reunions, it is a safe bet that Costikyan is a son – not a "dim witted son in law" – so I should be off the hook for that remark in my blog.
All of that said, there are two reasons why I have staked out the position I have regarding the Estate Tax. First, the notion that the Jarvis family is at great risk of losing the business is more smoke than fact. The Republicans are trying to repeal the tax all together – the position Costikyan advocates. The Democrats have compromised by offering a bill to raise the exemption to $8 million (assuming the Jarvis boys are married men). Further, the current estate tax law gives the Jarvis family 14 years to pay off any amount above the exemption if more than 35% of the estate is actually tied up in the business. With an $8 million grub stake and a 14 year low interest loan for the balance, I think young Costikyan can squeak by. In fact, the incidence of families losing their family businesses and farms due to the Estate Tax has been near zero – Willie Nelson and the Farm Aid bunch notwithstanding.
More important is the reason for the Estate Tax in the first place. It is not about taxes – it is about the crux of the American dream. Its purpose is to prevent an American aristocracy. It is hard enough for a middle class person, let alone a low income person, to create a business today. Most come out of school with a pocketful of promissory notes for student loans and nothing in the bank. It takes hard work just to get a family up and going and to put a roof over their heads. Going beyond that and putting together the capital to get into manufacturing is nigh impossible.
In the New England town where Jarvis Cutting Tool holds forth, there may well be a young man or a young lady named Smith who will make a better manager, a better employer and a better business owner than Costikyan – probably not, but maybe. The Smith Cutting Tool company will never happen if, in addition to putting together the capital it takes to form the company, he or she has to compete with Costikyan who has a completely established, fully paid up, tax free factory full of machines. It just can’t happen. The employees and customers of Jarvis most certainly have been well served by the Jarvis family, but just maybe they would be even better served by the Smith Cutting Tool company. We and they will never know.
I have written this blog about Jarvis simply because Costikyan Jarvis took the time and effort to respond and it is certainly not fair to single that family out. (I hope they have a sense of humor in addition to their obviously sharp business skills.) I have enormous respect for the Jarvis family and what they have accomplished. I am merely a pundit – a critic – while they put it on the line and fight the manufacturing battle every day. I do hope that when Marshall’s time comes (hopefully not soon) the company stays in the family. But c’mon guys. Have a little faith in Costikyan. I think that with an $8 million headstart and the knowledge and work ethic the family has instilled in him, he will be able to make it in this world.