Snuff out the Estate Tax
The U.S. should repeal the taxes heirs must pay when inheriting money, real estate, and other assets. Pro or con?
Pro: Ending the Tax Would Spawn Job Growth
According to a 2006 Joint Economic Committee report, tax data for the years 1995 to 2005 show that estate taxes were paid during that period by more than 37,000 "closely held businesses," 24,000 family farms, 50,000 limited partnerships, and 28,000 "other" noncorporate businesses such as sole proprietorships.
Congress is now considering making the current 45%* estate tax rate permanent or even raising it. What Congress should be doing instead is repealing the punitive tax, which hurts the very businesses that are the backbone of the economy, producing an estimated 60% of gross domestic product.
Repealing the tax would boost business investment and create new jobs—as many as 1.5 million, according to a recent study by former Congressional Budget Office Director Douglas Holtz-Eakin.
The estate tax provides an ideal vehicle for demagogues to attack the wealthy. What the estate tax itself attacks are people who work hard to build businesses that they hope to keep in the family after they die. For many, the estate tax kills that dream.
*Please note: This figure was corrected after its original press time.
Con: The Estate Tax Promotes Shared Prosperity
The federal estate tax is our country’s most progressive tax and our only tax on wealth. Since 1916, it has helped reduce the concentration of wealth that weakens our democracy.
The estate tax has been cut five times since 2001, with the result that few people, including farmers and small business owners, pay it now. Repealing it would increase the federal deficit by $1.3 trillion dollars over 10 years, according to the Center on Budget & Policy Priorities, and leave the struggling middle class even worse off.
The anti-estate tax campaign has been funded by a few super-wealthy families who own giant companies like Mars Candy, Gallo Wines, and Wal-Mart (WMT). Their lobbyists pushed for the nonsensical law that eliminates the estate tax in 2010, then brings it back in 2011. Cutting the estate tax again would give a huge tax break to the same corporate executives and Wall Street speculators who wrecked the economy.
A married couple can pass on $7 million tax-free—a pretty good head start for the offspring. With that exemption, few small businesses would ever feel the tax at all. Many small business owners and farmers, including the National Farmers Union, support the estate tax. They know a robust estate tax will fund vital public services that rebuild the middle class and create more broadly shared prosperity.
The wealthy share a responsibility to America to pay taxes, and many wealthy people like me support the estate tax because we realize there can be no private wealth without public resources. It’s time for Congress to do what’s right and establish a strong estate tax starting in 2010.