June 17, 2002

A STAY OF EXECUTION FOR THE DEATH TAX

Opponents of the estate tax suffered a setback last week when the Senate voted down a measure that would have repealed the immoral and counterproductive tax permanently. Thanks to 44 senators, the death tax likely will remain a thorn in the side of American families.

The estate tax, more accurately known as the death tax because it is levied when a taxpayer dies, confiscates anywhere from 37% to 55% of a individual’s assets. While these rates are unconscionable, the death tax also represents an especially galling form of double taxation. Americans already pay federal and state income taxes throughout their working lives. They pay income and capital gains taxes on money they save and invest. They pay local property taxes on their homes. They pay various sales taxes whenever they buy something. They even pay steep federal taxes on gasoline and telephone use. Yet after a lifetime of burdensome taxes, the death tax punishes Americans one last time simply because they worked hard, saved, and invested to pass something on to their families.

Last year the House debated an outright repeal of the tax as part of the Bush tax plan. Although liberal members prevented the passage of a immediate repeal, a slow ten-year phaseout compromise bill did pass in both the House and Senate chambers. Incredibly, however, the Senate added a provision that would cause the tax rules to revert back to the current system after the ten year period. In other words, the death tax will return after 2011! So a taxpayer dying in 2010 would pay no estate tax, while his unfortunate neighbor dying the next year would get a whopping bill from the IRS. The accountants and tax attorneys might support this crazy system, but it creates an estate planning nightmare for American families. Some doctors even warn that it could give elderly people a morbid incentive to time their deaths out of concern for their loved ones. Yet although the House recently voted to make the death tax repeal permanent, the aforementioned 44 senators decided the government should remain the unwelcome heir to millions of American estates.

The tired argument that the estate tax only affects the rich simply false. Many of my constituents are farmers, ranchers, and small business owners. They are hardly rich, but some of them have built up valuable businesses they would like to pass on to their children. Yet when they die, their children rarely have the liquid cash needed to pay the death tax bill. Often the business must be sold or divided to raise money for the IRS. Many family farms across this country have been bought by large corporations because of the estate tax.

Ultimately, the argument against the death tax is a moral one. People should not be punished for working hard, saving, and building wealth. Our society should respect the most basic property right, namely the right to dispose of one’s property as one wishes. The American dream is based on making a better life for one’s children, despite the empty rhetoric of the class-warfare politicians in Washington. Building wealth is not sinister, it is admirable. Our tax rules should encourage the decidedly American virtue of saving for the future.