Academic journal article Journalism History

"I'm Going to Introduce Them Again and Again": Morris Udall's Attempts to Protect Independent Newspapers, 1975-1982

Academic journal article Journalism History

"I'm Going to Introduce Them Again and Again": Morris Udall's Attempts to Protect Independent Newspapers, 1975-1982

Article excerpt

From 1975 to 1981, Congressman Morris K. Odall of Arizona led a legislative fight to save the independent, family-owned newspaper at a time when there was still an opportunity, however small, to confront the industry trend of group ownership. Though initially unsuccessful in his attempts to garner support, Udall finally drew an attentive audience when he focused his efforts on a tax structure that he believed was responsible for an all-too-common scenario: Newspaper groups' demand for additional properties was driving up the real market value of newspapers, therefore increasing the state and federal estate tax burden for owners wishing to leave their properties to their heirs. This research explores the debate that accompanied the nation's strongest attempt to preserve the independent, family-owned newspaper.

Thirty years ago, a Capitol Hill discussion concerning the federal estate tax - such as the ongoing one held since 2010 - would have prompted significant argument by the newspaper industry. But today, the industry seems to have abandoned a longheld, twentieth-century claim that the estate tax was playing a major role in the weakening of America's newspapers. '

While he certainly was not the pioneer of the fight against the estate tax, no one trumpeted its evils more than the late Representative Morris K. Udall. A former journalist himself, the Arizona congressman waged a long legislative battle thirty years ago that was intended to strengthen local ownership of newspapers. Local ownership, it was widely believed, felt a greater obligation to keep a newspaper in business.

Udall's concern was that the estate tax penalized families who wished to pass on newspaper properties from generation to generation. Instead, it became advantageous for the owner to sell the newspaper. At the same time, tax law allowed newspaper groups that invested in other properties to avoid having to pay capital gains taxes.2 Media historian Steve Helle, citing an unpublished 1982 study by James N. Dertouzos and Kenneth E. Thorpe, added that ownership groups also received depreciation allowances and investment tax credits, giving them an estimated annual tax savings of nearly $4 million.3

The prevalence of situations in which estate tax concerns led direcdy to a family's sale of a newspaper to a corporation may be debatable. In Loren Ghiglione's compilation of case studies concerning newspaper sales in the 1970s and '80s, family owners cited estate tax concerns in five of the ten cases.4 Demand for newspaper properties had increased in these years, prompting higher-than-average sale prices. It is just as likely that estate taxes were used to distract the public for the real reason for the newspaper's sale - a lucrative deal.

Still, one newspaper principal in 1978 described what the estate tax was doing to the industry. V.l. Minahan, president of the Post Corporation, said it was realistic to believe that the heirs to a family newspaper would likely number as many as three children. "On their passing, the owners become nine, and finally twentyseven, and so on," he wrote. "Add this to the fact that each time the property is passed from one generation to the next, both federal and state governments demanded large chunks as estate taxes and the only surprise is that the trend toward groups began as late as it did."5

The trend toward group ownership has been debated for decades. But more recently, critics of group ownership have charged that the corporate structure of such media conglomerates - most notably those whose stocks are publicly traded - is playing a major role in the demise of some newspapers. Seattle Times Publisher Frank Blethen described this business model - what he called "the dominant ownership model" - in a May 2009 address to the Senate Commerce Committee. According to Blethen, from the mid-1980s to 2000, classified advertising revenue soared to nearly 50 percent of newspapers' ad revenue. "With the classified revenue bubble the financial consolidators found that they could milk newspapers during this period for obscene cash margins of 20 to 35 percent," he said. …

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