Death Tax: Do Not Resuscitate

Obama To Reverse Expiring Death Tax 

One of the most controversial and perhaps destructive of all taxes imposed on Americans is the "death tax," whereby the government reaches one last time into the people's wallets. At death, a person's residual wealth, accumulated over a lifetime and already subjected to numerous tiers of taxation, becomes the attractive carrion of the redistributive looters. Since the majority of those effected by the death tax are labeled wealthy, most people, liberals, especially, have shown little sympathy for those being hit by the tax. In fact, President Obama's 2010 budget calls for the largest death tax increase in U.S. history, and with numerous fiascos in play, little attention is being given to the matter.

Zero Percent Death Tax Opportunity in 2010

In 2001, President George W. Bush set up a law that would phase the estate tax rate from 55% down to 45% in 2009. Then in 2010, and for that one year only, the death tax rate would go down to zero percent. Unless further legislative action was taken, that tax law would then expire in 2011, and the death tax rate would revert back to 55%. It was hoped that having a zero percent death tax rate for 2010 would help make the case for eliminating the death tax altogether or at the very least make it very difficult for the high rate to return. For that very reason, Obama doesn't want the tax rate to ever hit zero. Regarding taxes, the President's Chief Economic Adviser has stated, "Let's be very clear: There are no, no tax increases this year. There are no, no tax increases next year." But buried in footnote 1 on page 127 of the Presidential Budget is a pronouncement that reads, "The estate tax is maintained at its 2009 parameters."

The death tax currently exempts estates valued below $3.5 million ($7 million for a couple). Yes, that sizable an estate will exempt the majority of Americans and most of us are more worried about our money lasting throughout our lifetime than how much will be left when we are gone. So why should care about the death tax at all? Keep in mind that a large portion of the accumulated wealth being taxed is not readily-available cash, but is tied up in the land of the family farm or in the real estate and inventory of small businesses. Forcing families to sell their farm or business to pay the death tax has a direct effect on Americans relying on those farms and businesses for jobs, livelihoods, and even the amount of food produced in this nation.

Using what is called the Summers study, former Congressional Budget Office Director Douglas Holtz-Eakin found that eliminating the death tax would result in a $1.6 trillion increase in small business capital over the long-term. This additional increase in capital represents the creation of 1.5 million new jobs. If ever our economy could use that type of job growth, wouldn't now be a feasible time to test the merit of the Summers study while we have the opportunity and allow the 2010 zero percent death tax rate to occur. If it was found that more good than harm came out of eliminating the death tax, further legislation could be considered to repeal or extend the death tax. If the 2010 trial proved unsound for the economy, no further action would be necessary and the old death tax rate of 55% would automatically return in 2011.

Even Marxist economic theories agree that the key to long-term growth and higher standards of living is dependent on saving and investing. Tomorrow's financial growth is dependent on savings from today's income, the same way that a farmer must store a portion of each year's seed in preparation for future crops. America should follow the lead of other nations that have figured out that the death tax is damaging in a competitive global economy. Hong Kong has eliminated its death tax, and so have some European states, often considered welfare states, such as Austria and Sweden. Australia, Russia and New Zealand have also figured out that penalizing wealth creation is not a sensible economic strategy.