Update: The U.S. House of Representatives recently passed The Death Tax Repeal Act of 2015! Now the fight begins in the U.S. Senate. Want to abolish the Death Tax? Take action now!
For the first time in ten years, the U.S. House of Representatives this week will vote on a bill to kill the death tax once and for all. H.R. 1105, the “Death Tax Repeal Act of 2015″ is sponsored by Congressman Kevin Brady (R-Texas.) and notably features the co-sponsorship of Congressman Sanford Bishop (D-Ga.), a member of the Congressional Black Caucus. Earlier iterations of this bill have enjoyed the co-sponsorship of a majority of the chamber, so passage is not in doubt. Maybe that’s why 81 business and citizen grassroots organizations have signed a joint letter under the auspices of the Family Business Coalition urging Congress to kill the death tax.
With the fate of the bill a sure thing, let’s reflect on the top ten reasons the death tax deserves to die:
1. The death tax is not fair. At a basic level, Americans know that the death tax is not fair. It’s not fair that you earn income all your life and pay heavy taxes on it. It’s not fair that you save your hard-earned money and pay taxes on what you make. It’s not fair that you build a small business and face exorbitantly high tax rates. But all of these unfairness taxes pale in comparison to the death tax. The death tax is a tax you pay on savings you have already paid taxes on at least once, and potentially more than once. It results in the liquidation of first and second generation farms and businesses just to pay the tax. Why should a business have to pay taxes again just because an owner has died?
2. The death tax is not popular with the American people. In a 2009 Tax Foundation poll, the death tax was considered the “least fair” by the American people, even more unfair than the income tax. In poll after poll for decades now, the death tax has consistently been opposed by 60 to 70 percent of adults, registered voters, and likely voters. The results are in, and the intense opposition to the death tax is unquestionable.
3. The death tax collects almost no tax revenue. According to both the Congressional Budget Office and the Office of Management and Budget, the death tax is expected to bring in about $20 billion in tax revenue this year. Now, in the real world that’s a lot of money. It’s not a lot of money by Beltway tax collection standards, though.
The federal government is anticipated to collect $3.2 trillion in tax revenue this year, according to CBO. Do the math, and it will take about 55 hours–out of the whole year–to collect all the revenue from the death tax. That’s 2 days out of 365 days in the year.
To put it another way, suppose all the revenue the federal government was going to collect this year was represented as $100. In that case, the death tax would be about $0.63 out of that $100.
You get the picture.
4. The death tax is a declining source of federal revenue. As recently as 2000, the death tax wasn’t the joke of a revenue source it is today. Back then, it raised a respectable 1.5 percent of all federal revenues. But today it’s less than half that. As time goes by, we should expect the death tax to continue to wither on the vine as a real revenue source, as it has for years. The true reason for collecting it is not to raise tax revenue, but it’s out of a misguided sense of class warfare ideology.
5. The truly rich don’t pay the death tax. As our liberal friends at the Center for Budget and Policy Priorities have recently reminded us, “many wealthy estates employ teams of lawyers and accountants to develop and exploit loopholes in the estate tax that allow them to pass on large portions of their estates tax-free. These strategies don’t benefit the broader economy; they only allow the wealthiest estates to avoid taxes.” I couldn’t have said it better myself. The uber-rich can afford these “teams of lawyers and accountants” to “develop and exploit loopholes” for their clients. First and second generation business owners and family farmers cannot. As a result, Paris Hilton will be death tax free her whole life (and beyond), but startup business owners will either have to pay the death tax or funnel scarce capital into their own little army of tax nerds and lawyers.
6. Chances are, you don’t live in a state with a death tax. While Congress has been sitting on their hands for ten years not repealing the death tax, states have been doing their “laboratories of democracy” thing. Non-death tax states now outnumber death tax states about 30-20, and those dwindling number of states which still have a death tax are either looking to scrap it or are greatly increasing their state death tax’s “standard deduction.” It’s not a good revenue source, and states know it.
7. Most countries have a death tax rate far lower than our own, and many have no death tax at all. The United States, with its gut-punching 40 percent federal death tax rate plus the various state rates, has the fourth-highest death tax rate in the world. We’re only ahead of Japan, South Korea, and France. Many familiar countries–Australia, Canada, Israel, and even Sweden–have no death tax at all. In a world where capital is mobile and global, this matters a lot. People don’t have to die in the United States.
8. The death tax is bad for jobs and killing it would give you a raise. Again according to the Tax Foundation (they’ve done some great work in this field) the death tax is an economy killer. They have a macroeconomic “dynamic” model to see what killing the death tax would do to the job market. It projects that killing the death tax would create 139,000 jobs, increase private business hours by 0.1 percent, and increase wages by 0.7 percent.
9. The death tax is bad for economic growth and repeal literally pays for itself. The same Tax Foundation report says that the death tax would increase the economy by 0.8 percent (or $137 billion in today’s dollars).
Because this additional economic growth would be subject to taxation all its own, it would more than make up for the revenue lost by repealing the death tax–it would make up the $20 billion per year, plus yield an extra $8 billion per year on top of that. You heard that right–we’d actually collect more tax revenue if we stopped collecting the death tax.
10. The death tax is even bad for the environment. A recent study by Brian Seasholes at Reason shows that the death tax leads to the subdivision of many large, privately owned land tracts. That’s because heirs–land rich but cash poor and in need of money to pay the death tax–sell off parcels of land in order to satisfy Uncle Sam. This leads to development of land which would never have been developed except for the death tax.
Do you agree with Ryan that the Death Tax should be repealed? Urge your senators to kill the death tax right now!