Smith Votes To Bury Death Tax
Washington,
Jun 20, 2003 -
Last week in the House of Representatives we voted to permanently eliminate the estate or “death tax.”
The death tax is a form of double taxation. Small business owners and family farmers pay taxes throughout their lives. At the time of death, they are assessed another tax on the value of their property. This often forces them to sell their assets to pay for the additional tax burden imposed by the government.
In 2001, Congress passed legislation that provided $1.3 trillion in tax relief for America’s workers. Due to a Senate rule all the tax relief provisions, including the death tax, expire or “sunset” on December 31, 2010.
This means those who die in the year 2010 pay no estate tax. But someone who lives one extra day and dies on January 1, 2011, pays a devastating estate tax of up to 55%.
According to the National Federation of Independent Businesses, one-third of small business owners today have to sell outright or liquidate a part of their businesses to pay death taxes.
The death tax is a major reason why more than 70% of family businesses do not survive to a second generation. And 87% don’t make it to a third generation. These businesses are the engine that drive our economy.
According to the American Farm Bureau, individuals, family partnerships, or family corporations own ninety-nine percent of farms. About half of farm and ranch operators are 55 years or older and approaching the time when they will transfer their farms and ranches to their children.
Last year, the House voted twice to make death tax relief permanent, but the Senate failed to pass the plan and opted instead to keep in place only a temporary repeal of the death tax.
The uncertain future of the death tax makes it difficult for owners of family businesses and farms to make wise economic decisions. They are forced to take into account either its phase-out, complete repeal, or reinstatement, which leads to uncertain planning and unintended consequences.
While the evidence for repeal of the death tax is strong, there is another fact to consider: it raises little revenue. In 2001, estate and gift taxes represented only 1.4% of total federal revenue. No one, including the IRS, should miss this unfair tax.
Without permanent repeal, the death tax continues to undermine incentives for work, saving and investment. It’s time for the U.S. Senate to follow the House and permanently bury the death tax.
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