‘Up north’: An Ideal Ruined By Government

Taxes and other federal policies made the lakeshore building boom inevitable.

The memory is still vivid. Sitting on the front steps, enjoying a warm night’s breeze and watching the glow from my father’s Camel cigarette light up the darkness.

Inevitably, I would spoil the tranquility by blurting out the same persistent question over and over, “Dad, when are we going to the lake?”

Given the demands of a small family business, the late summer trek north was our only break and the highlight of every year. Contrary to popular myth, most business owners plow whatever cash they accumulate back into the business in order to stave off the down years or at best pass on some equity.

So there was no grand lake lodge for the Lewis household.

But there was the assurance that come every August, for as long as I can remember, we’d be at the very same cabin at the very same resort on the very same Whitefish chain of lakes just north of Brainerd. And it was heaven.

The smell of the north woods surrounding a pristine beach, the rustic look of knotty pine interiors and brilliant sky-blue exteriors, and the “up north” state of mind remain something time cannot erase.

Unfortunately, memories are all most Minnesota families have of their favorite lakeside resort. The 70-plus small-business establishments that used to dot the shores surrounding the Whitefish chain have been reduced to a handful.

Now the area looks more like Wayzata north, not the remote frontier woods it seemed when I was young.

Far be it for me to begrudge anyone their private mansion on the lake. But as another vacation season draws to a close, it’s worth considering how government policy aided the destruction of a middle-class tradition.

Let’s start with the cocktail party notion among political and business elites that the estate tax doesn’t really matter. Try telling that to the resort owner who told me a few weeks ago, on my last weekend up north for the season, that he and his siblings had to sell off one of the most valuable parcels of land in order to pay the death tax.

When I asked him, “What’s your biggest expense in running the resort?” the answer was quick and to the point: “Taxes.”

Warren Buffett may think the estate tax is a good idea — and why not? The life insurance policies his company sells are tax-free, and thus become a convenient strategy to avoid the cost of dying.

Moreover, a business desperate to raise capital in order to pay Uncle Sam’s inheritance tax just might be a nice target for Buffett’s megafirm to snatch up at fire-sale prices. Of course, none of this has discouraged the Oracle of Omaha from sheltering the bulk of his fortune from federal taxes by establishing charitable foundations in the name of his children.

Nevertheless, the two-decade-long climb in real-estate prices appears to have been the coup de grace.

A massive explosion of money and credit in the name of federal stimulus financed a cabin-building boom — predictably leading to a vicious bust. In the process, however, it became far more lucrative for resort owners to sell their property than to manage it, especially so given the rising costs of doing business.

In the late 1960s, you could rent a three-bedroom cabin on the lake for $100 per week or less (you read that right). The annual household income then was slightly under $10,000, so about 1 percent of earnings would suffice. Today, while the median income hovers around $49,000, the cabin rents for $2,000, or 4 percent of family income.

The ravages of inflation, taxes and no doubt excess regulation (we’ve only got so much space here) have conspired to put the great “up north” getaway out of reach for far too many Minnesota families without so much as a peep from the so-called protectors of the middle class.

Published in the StarTribune, October 2, 2011