Death to the Death Tax

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from NCPA,

Upon death, the federal government taxes 40 percent of the deceased’s income and assets above an exemption threshold. The tax yields a miniscule amount of federal tax revenue while, at the same time, crippling family businesses. Rachel Greszler, senior analyst at the Heritage Foundation, argues the tax needs to go.

Polls routinely find little support for the death tax, which taxes wealth that has already been taxed throughout the person’s lifetime. Analysis from the Heritage Foundation confirms that abolishing the federal death tax would increase economic growth by $46 billion over the next decade, creating 18,000 jobs annually over the same time frame.

Greszler explains how the tax works: 40 percent of a person’s income and assets above $5.34 million are taken by the federal government at death. The tax not only hits individuals but often hurts small, family-owned businesses which have significant assets but little in the way of cash. To comply with the tax, the family is often forced to sell off many of the business’s assets, if not the entire business. A number of businesses have been lost due to the tax, hurting those families as well as their employees. Additionally, many Americans spend time and money trying to avoid the tax, which only hurts the economy as individuals invest less and spend more, and businesses try to stay below the death tax threshold.

With such negative consequences, one might assume that the tax must yield substantial revenue in order to justify its ill effects, but that is not the case. As Greszler explains, the tax is responsible for one-half of 1 percent of federal tax revenue. The tax should be eliminated.

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