Originally posted on February 5, 2010.
Some Americans have declared 2010 the “best year to die.” Due to the temporary expiration of the estate tax or death tax, all individuals that pass away this year are guaranteed that their loved ones will receive their inheritance in full. Those that pass away are not forced to leave their mourning family with the burden of paying exorbitant taxes on their belongings.
Yet, in Obama’s 2011 proposed fiscal budget he plans on reinstating the 45-percent death tax with a $3.5 million exemption. Senate Minority Leader Mitch McDonnell (R-Ky) concisely explains Americans dislike of the death tax:
There’s nothing that outrages the American people more than the thought that they will have to visit the IRS and the undertaker on the same day.
According to the Heritage Foundation, the 2011 proposed 45-percent death tax would disproportionally affect family farms and businesses:
Family-owned businesses are often asset-rich but cash-poor. They have equipment, real estate, and inventory that makes them appear valuable on paper. But they have comparatively little cash on hand. When a family member dies, the death tax is an enormous burden on them. Many have to sell their assets, or in some cases the entire business, to pay the tax. Or they must divert the precious cash flow they need to grow the business over many years to pay the tab.
In a Heritage Foundation video, Kevin Hancock owner of Hancock Lumber explains how the death tax has hurt his 6th generation family business:
On the one hand, we inspire to grow our business to create more jobs and economic activity. On the other hand, we know as we do that the future potential estate tax obligation just continues to go up. For a family business, it’s very tough to plan for that and it’s an unfair competitive disadvantage… people often look at the income that is received from the estate tax but they don’t understand or look closely enough at the revenue that is lost from the disincentive that encourages family businesses to stay small…what the federal government is effectively doing is offering a major tax discount to sell your family business as opposed to keeping it. I can’t think of any tax structure more backward than that.
During the current economic crisis, with an average unemployment rate at 10%nationally and likely to rise, this is the worst time to restore the death tax. If Obama wishes to spur job growth, he should focus on repealing the unfair and immoral death tax. Douglas Holtz-Eakin, former director of the Congressional Budget Office, found that eliminating the death tax would increase employment and stimulate the economy, including:
Create 1.5 million additional small business jobs, slash the current jobless rate by 0.9%, increase the probability of hiring by 8.6%, increase payrolls by 2.6%, expand investment by 3% , increase small business capital by over $1.6 trillion…
The Obama administration should repeal this immoral double tax that taxes one’s property that has already been previously taxed. In addition, it discourages savings and investment while punishing hard workers that wish to pass on their assets to their children. Daniel J. Mitchell, a scholar at the Cato Institute, explainsthe irrationally behind the death tax:
The tax code sends a perverse message to America’s entrepreneurs, investors, small-business owners and farmers: If you squander your money as quickly as possible, the government will not tax you. But if you behave responsibly and invest in the nation’s future, the government will swoop in like a flock of vultures and grab a huge chunk of your money when you die.
For more reasons why Americans should oppose the death tax, see:FreedomWorks’s death tax page.