Estate Tax

I noticed in this morning's paper that a Republican-backed effort to repeal the estate tax didn't make it through the Senate (Yahoo news story).

Richard Durbin, a Democrat from Illinois, had the following to say about it, "This bill has nothing to do with the average American. It is about the wealthiest people in America flexing their muscles and pushing through on Capitol Hill the most outrageous piece of special interest legislation in modern memory."

That is just a continuation of the myth held by so many liberal politicians on this issue. Of course, some of the people that would be helped by this are wealthy. There's no disputing that fact. But the people hurt most by the estate tax are family businesses. The estate tax taxes not only liquid assets, like cash and securities, but also taxes on things like real estate and business property. So, too often, the heirs of a family business owner are left with the decision of either having to come up with an inordinate amount of money to pay estate taxes or having to sell the family business.

Now, keep in mind, that the whole time this business made money and purchased property, they paid income taxes and property taxes. The estate tax amounts to nothing more than unfair double taxation and it amazes me that our lawmakers have allowed it to persist for as long as they have. But, leave it to politicians to try to extract every dime they can from the taxpayers.

Family business research has actually shown that the estate tax has a negative net effect on the economy. Business owners are reluctant to expand and invest in their business out of the fear of potential estate tax burden to their heirs.

I do understand the logic some of these opponents have. We as a country do need to exercise greater fiscal responsibility, especially in a time of war. Few people seemed to pay attention to the compromise offered by Senator John Kyl. He proposed eliminating estate tax on those estates of $5 million and under for a single person or $10 million and under for a married couple. This would seem to offer protection to those family businesses who would be most negatively effected by the tax. This would be a good first step, however, I still think the eventual outcomes needs to be to completely repeal this tax. Just because it seems to mostly hurt the wealthy doesn't make it right: people have already paid income taxes on the money they've made and now we ask them to pay taxes again passing that post-tax money down to their heirs? That just doesn't seem right to me.

-JRO