The death tax, or estate tax has been implemented in the United States 4 times in our nations history. Each time it was sold as a temporary tax to pay for a national catastrophe. The first three times it was repealed after just a few years, the fourth death tax has yet to die.
In 1797 the death tax was first imposed in order to pay for a buildup of the Navy, and it was repealed in 1802. In 1862 it was implemented to pay for the Civil War, and was repealed in 1870. In 1898 the death tax was instituted to pay for the Spanish-American War, and it was repealed in 1902. Finally, Congress imposed the death tax in 1916 to help fund World War I, and we are still living with it.
This morning, the 60 Plus Association hosted a death tax panel discussion at The National Press Club. Grover Norquist, of Americans for Tax Reform laid out that this tax is not only outdated, but it is unfair and ineffective.
The death tax sends the IRS to the homes of grieving families, sometimes before the funeral of their loved ones. It does not simply target people hoarding cash, but attacks small family businesses. Many family farms have are asset or land ‘rich,’ but are cash poor. They often must sell generational homes to larger corporations, just to pay the 40% death tax.
Typically, the ultra wealthy people don’t have to worry about this death tax. They’re able to pay lawyers and accountants to sidestep this tax through trusts and foundations. It mostly hurts the moderately wealthy, or the ‘cash poor’ and ‘land rich.’
The death tax is also ineffective, and it hurts the United States economy. Small businesses are hurt or even destroyed by this tax. Rather than being able to reinvest in their existing businesses or in new companies, thus creating jobs, small business owners must pay this massive tax. Palmer Schoening, Chairman of the Family Business Coalition, estimates that repealing the death tax would create around 160,000 new jobs.
Additionally, our death tax is extremely uncompetitive internationally. The European inheritance tax average is about 15%, whereas the U.S. rate is 40%. This makes us the 4th highest death tax rate of OECD countries. A repeal of the death tax would incentivize foreign investors and entrepreneurs coming to the United States.
Finally, repealing the death tax is actually politically popular. Schoening said his push for repeal of the death tax has the support of over 120 economists and 150 business organizations. According to an NPR poll, 76% of Americans across the political spectrum agree with repealing the death tax.
The death tax was imposed over 100 years ago as a temporary measure to help the nation during a catastrophe. It is not only outdated, but it’s unfair, ineffective and unpopular. Today, if there is one thing everyone can agree on, it’s that it’s time to kill the death tax.