Paul L. Caron
Dean



Tuesday, November 10, 2009

Seven Reasons Why Congress Should Repeal, Not Fix, the Estate Tax

The Heritage Foundation has published Seven Reasons Why Congress Should Repeal, Not Fix, the Death Tax, by William W. Beach:

The House and Senate may soon begin debate on what to do with the federal estate tax. If Congress fails to act before January 1, 2010, current law calls for death taxes to disappear entirely for one year before returning in 2011 at a top rate of 55% and a $1 million exemption of taxable estate. The 2009 tax rate is 45%, and the exemption stands at $3.5 million per taxpayer.

What should Congress do? Some Members want to permanently "fix" the death tax by reducing the top rate to 35%, which some pro-death tax policymakers suggest is a rate wealthy taxpayers could "afford." However, this would be the wrong move for Congress to make. Instead, policymakers should do what their voters want them to do, as revealed in poll after poll: They should repeal this tax and kill it, once and forever. ...

As Members of Congress consider whether to retain federal death taxes, they should ponder the principal reasons why they should join prior Congresses and repeal this tax.

  1. Death taxes discourage savings and investment
  2. Death taxes undermine job creation
  3. Death taxes suppress productivity and wage growth
  4. Death taxes contradict the central promise of American life: wealth creation
  5. Death taxes hurt those who have tied their savings up in land
  6. Death taxes hurt African-American business owners
  7. Death taxes hurt women business owners
UpdateMore on the Estate Tax -- The Heritage Foundation Speaks Gobbledygook (ataxingmatter)

https://taxprof.typepad.com/taxprof_blog/2009/11/seven-reasons.html

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Tracked on Nov 12, 2009 8:24:28 AM

Comments

Death taxes allow the wealthy plutocrates, who claim "free markets", "hard work" and "earned fortunes", to maintain their plutocracy!

Posted by: California CPA | Nov 10, 2009 12:06:58 PM

This is not exactly what one would call researched opinions. Isn't the more universal view of the "death tax" that it helps productivity, because inherentence income has the same impact as welfare?

Also, to the degree that "death taxes" affect people with land investments over people with other kinds of investments and assets, wouldn't that be an easy fix, by taxing net wealth (if we don't already, I assume we did) instead of gross wealth? Isn't this "fix, not repeal"?

And how does death taxes impact women or minority business owners more than your more common white male business owner?

Correcting for these points, isn't his argument:

1) Death taxes discourage saving and investment? (probably true, but to an overstated degree)
2) Death taxes undermine wealth creation.
3) Death taxes hurt business owners.


Posted by: Justin | Nov 10, 2009 12:15:50 PM

I really don't understand how "Death taxes hurt those who have tied their savings up in land" anymore than it hurts people that created value from a private business or a person that increases their wealth through investments.

Can anyone explain?

Posted by: Joe C. | Nov 10, 2009 12:54:29 PM

1. Lack of death taxes encourages investment lock-in and inhibits efficient allocation of investments.
2. Lack of death taxes inhibits job creation (see #1)
3. Lack of death taxes discourages the real central promise of American life: that hard work and smarts, and not being born lucky, are to be rewarded.
4. Lack of death taxes discourages the 19th century view that wealth comes from holding huge tracts of under-utilized land.
5. Why do death taxes harm women and African-American business owners? And why should anyone believe that the folks who have so consistently opposed equality for women and minorities now have their interests at heart?

Posted by: Anonymous Poster | Nov 10, 2009 4:49:40 PM

No one pays a dime in estate tax unless the estate is more than $7 million with marital deduction.

This preoccupation with tax justice for Paris Hilton just floors me. That may be "The Central Promise of American Life" to Heritage Foundation, but not for me.

Its just amazing that the same people who decry deficit spending (Sen. Jon Kyl)turn on a dime and advocate repealing the estate tax. That's $20 billion per year folks. To put that in perspective, that's enough to provide health care to every child who doesn't have it. Its enough to build a new High Speed Rail line every single year.

The tax falls on the top 1/4 of one percent of Americans. Remember, the old people would have eventually paid capital gains tax on the money if they had lived long enough. Their heirs get a complete free ride on the capital gains tax as it is.

The business about "harming African Americans and women" is so much eyewash. The theory goes that African Americans and women with that kind of wealth are somewhat more likely to be first generation business owners. Ergo, the estate tax "hurts women and African Americans" I guess its good that Something raises the consciousness of Heritage Foundation.

Posted by: Chet Hardy | Nov 10, 2009 5:24:31 PM

OK, lets say I die with $50 million (I won't, but hypothetical).

I earned this money legally by playing baseball, inventing a widget, stock speculation, growing wheat - whatever - and paid all the required income taxes on it during my lifetime. Its my property.

What give the government the right to seize this property, and interfere with my right to give it to whomever I see fit?

I see no difference between this and some guy holding me up at gunpoint on the street corner to steal the $50 in my pocket.

If its OK to seize the property in excess of some "acceptable" amount at death, I suppose street corner hold ups are OK too as long as you leave the victim cab fare.

Posted by: Observer | Nov 13, 2009 11:58:03 AM