Death, Taxes And A Very Bad Budget

Death, Taxes And A Very Bad Budget

By INVESTOR'S BUSINESS DAILY

Budget: Hidden in a footnote deep in the budget is a resurrection of the death tax. If you think this only affects rich people handing down their silver spoons to spoiled children, you're sadly mistaken.

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Part of the Bush tax cuts was a provision that would wind down the estate tax from its existing 55% to 45% in 2009 and then to zero in 2010.

The estate tax had taken the majority of a dead person's estate valued at over $3.5 million for an individual or $7 million for a couple.

Like the rest of the tax cuts, it was temporary. The estate tax repeal, unless made permanent, would rise like Dracula from the grave in 2011 to once again wreak havoc with those seeking to pass on their success to their heirs.

For the Obama administration, a year without an estate tax is a terrible thing to waste.

If you actually read the budget, which few do, particularly congressmen, you find this footnote on Page 127: "(T)he estate tax is maintained at its 2009 parameters."

The first Bush tax cut has been, in effect, repealed — part of the age of "fairness" we now all inhabit.

We are determined to keep or raise the capital gains tax, for example, even though to do so would lose revenues. As President Obama said when it was explained to him, we should still do it in the name of fairness.

It is the same with what many call the death tax. You can't take it with you, but the government can take it from you in the name of fairness and spreading the wealth, your wealth, around.

Some say the death tax only affects the very, very rich. But that's not the point. It's still their money.

What exactly is fair about a tax that taxes everything twice? Those who make good have already paid taxes in many forms accumulating that wealth.

Why should they be taxed because they worked hard, became successful, and want to pass on the fruits of their labor to their children?

While dubbed the "Paris Hilton" tax, the death tax hurts everybody.

"By and large, the death tax is borne by people who own small businesses, who haven't had the benefit of big corporate lawyers and big corporate accounting offices to prepare them for paying this tax," says William Beach, a senior fellow in economics at the Heritage Foundation.

"People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farms in order to pay the taxes," says House Minority Leader John Boehner, R-Ohio.

In an economy that is starved for capital, the death tax is dangerous. Even Obama's top economic adviser, Larry Summers, said in a study he co-authored in 1980: "The evidence presented indicates that intergenerational transfers account for the vast majority of aggregate U.S. capital formation."

Two of President Clinton's chief economic advisers, Joseph Stiglitz and Alicia Munnell, have written extensively on the impact of the death tax on capital formation.

The Joint Economic Committee has calculated that the death tax has reduced the stock of capital by $847 billion, money that can't be used to expand or start businesses or hire more people.

A new study by the American Family Business Foundation, written by economist Douglas Holtz-Eakin, finds that the death tax is responsible for lowering overall employment by 1.5 million jobs. It takes capital out of the productive hands of entrepreneurs' descendants and heirs and into the unproductive hands of government.

The death tax is about class envy, every bit as much as was the famous luxury tax of the 1990s, meant to punish yacht buyers. Remember that one?

It only succeeded in punishing yacht builders and the workers they employed, not yacht owners, and when the damage to jobs was surveyed, it had to be repealed.

As has been said, families shouldn't be required to visit the undertaker and the tax collector on the same day.

We doubt that those who said give us liberty or give us death meant death to be a taxable event.