In Estate-Tax Battle, One Man Does What He Can

Jack Fitzgerald resists selling his thriving auto dealership but the estate tax is an obstacle. He wants it repealed.
Jack Fitzgerald resists selling his thriving auto dealership but the estate tax is an obstacle. He wants it repealed. (By Lois Raimondo -- The Washington Post)
By Jeffrey H. Birnbaum
Monday, May 15, 2006

Whenever the chief executive of a big shareholder-owned auto retailer sees Jack Fitzgerald, he goes out of his way to say hello. But Fitzgerald, owner of Bethesda-based Fitzgerald Auto Malls, knows that the guy is not just being nice. He wants to sweet-talk Fitzgerald into selling his thriving business, which Fitzgerald does not want to do.

But he may have no choice. Fitzgerald's 40-year-old chain, which operates dealerships in Maryland, Pennsylvania and Florida, is too large for him to pass easily to his heirs without their being crushed by the estate tax. As a result, Fitzgerald, 70, has become a part-time lobbyist, meeting with members of Congress and peddling his own version of estate-tax repeal.

Unfortunately, Fitzgerald, though amiable and determined, is learning the hard way what generations of executives before him have come to know: The nation's capital is a difficult place for any one man to make things happen. Even though Fitzgerald is a native Washingtonian -- having grown up not far from the Capitol -- and is well-liked by many lawmakers, changing laws is a frustrating exercise. He isn't likely to succeed this year, lawmakers and analysts say.

Still, Fitzgerald, like the good salesman he is, remains optimistic. "I think there's an interest in making some sort of deal," he said. "But it has taken a lot of my time -- too much time."

Fitzgerald knows that he isn't a sympathetic character, at least from the standpoint of a publicly elected official. He's simply too wealthy. His company owns a twin-engine jet that Fitzgerald loves to fly. His more than 30 auto franchises in 14 locations bring in hundreds of millions of dollars of revenue each year. "Nobody loves rich people," Fitzgerald said. "When I was poor, I didn't like them either."

So he doesn't emphasize his personal well-being when he talks to lawmakers about the unfairness of the tax. Quite the opposite. He makes clear that he could sell his company and protect his family financially without any problem. He worries, instead, about his 1,400 employees, a large number of whom a new owner would probably get rid of, to cut costs and boost profits. "These people are important to me," he said. "I don't want putting a lot of them out of work on my conscience."

Fitzgerald has always run his business like an extended family and has never laid off an employee. Many of his top executives have been with him their entire careers and their children are on the same path. Harold Redden, a vice president, started as a floor sweeper 32 years ago. Now he has two sons in the business. Garry Jenkins, an executive vice president with the same length of service, also has two sons in the company. A few longtime employees have grandchildren on the payroll.

"That's what makes this place special," Fitzgerald said. "It's a compliment to us when they want to bring sons or daughters or cousins into the business."

But Fitzgerald does more than tug at the heartstrings. He also makes a compelling case against the estate tax on policy grounds. He notes that privately owned businesses like his are the nation's most effective engines for economic growth and job creation. Yet the estate tax has for years forced owners to sell to corporate giants, which often stifles innovation, expansion and good feelings between workers and their bosses.

Fitzgerald is so worried that he's been wearing down his shoe leather meeting with people in a position to help -- and donating to their campaigns. He's talked to several members of the Maryland congressional delegation -- though he said that Sen. Barbara A. Mikulski (D) will barely spare him the time. He has also been making his voice heard through the American International Automobile Dealers Association, the National Automobile Dealers Association and the National Federation of Independent Business, the chief small-business lobby -- each of which pushes constantly to repeal the estate tax.

A couple of weeks ago, Fitzgerald sat at a front table during a speech by Sen. Jon Kyl (R-Ariz.) at the U.S. Chamber of Commerce. Kyl is one of Congress's leading advocates for estate-tax repeal. and after the address Fitzgerald buttonholed him to express his support and to say that he had a plan that would eliminate the tax without the government losing all the revenue it produces.

Fitzgerald wants to pay his estate tax "in advance." He has calculated a series of surtax rates that, if applied to people at various levels of income, would replace the revenue generated by the estate tax each year. He said he is more than willing to pay what he owes through such a method rather than saddle his family with the entire burden when he dies. Fitzgerald is scheduled soon to lay out his plan in detail to an aide to Kyl.

President Bush has long backed the idea of ending what he calls "the death tax." But budgetary constraints allowed him only a partial victory in 2001. Bush signed into law a bill that eliminated the tax for one year only -- 2010. It will come back to life in 2011 unless Congress acts to change it. The Senate will probably vote on the issue next month.

Opponents of repeal argue that only a small number of people would benefit directly from such a change. Of the 2.4 million adults who died in 2003, only 28,600 left estates that were liable for any tax, according to the nonpartisan Tax Policy Center. In other words, the levy fell on the richest 1.2 percent of Americans with the highest taxable estates. What's more, they contend, a sharp reduction in the estate tax would deprive the government of many billions of tax dollars each year that are now slated for food stamps, health care and the like.

Fitzgerald says his plan would keep government whole while also keeping his business and employees together. And that kind of good deed, he hopes, would ease his entry into heaven. At the same time, he knows, quoting scripture: "It is simpler for a camel to go through a needle's eye than for a man with much money to go into the kingdom of God."

Jeffrey Birnbaum writes about the intersection of government and business every other Monday. His e-mail address is kstreetconfidential@washpost.com. He will be online to discuss lobbying, lawmaking and the estate tax at 1 p.m. today athttp://www.washingtonpost.com.


© 2006 The Washington Post Company