By U.S. Congressman Kevin Brady, senior member of the House Ways & Means Committee and vice chair of the Joint Economic Committee.
The Death Tax is a failed tax. And it needs to go.
By every measure, the federal estate tax has failed to achieve even the misguided goals Congress initially set for it. For nearly a century, it has failed to generate sufficient revenue; failed to redistribute income or boost the economy, and failed to meet any basic standard of fairness.
This failure is why a majority of members of the U.S. House of Representatives have co-sponsored my legislation to end this terrible tax once and for all. Senator John Thune (R-SD) is leading the effort to end this tax in the other chamber.
HR 1259 abolishes the federal estate tax permanently, because this tax generates more harm than good for theU.S. economy and federal tax coffers.
In a recent study titled “Costs & Consequences of the Federal Estate Tax: An Update,” economists on the Republican staff of the Joint Economic Committee point out the Death Tax has robbed almost as much capital from the U.S. economy as this tax has generated in revenue in its 96 years of existence.
The total revenue produced by this failed tax in almost a century is only $1.2 trillion, which fails to cover even one year of President Obama’s annual deficits. Remarkably, the revenues this tax will generate for this year covers barely a day of Washington spending.
Rather than redistribute wealth in America as its supporters hope, the JEC analysis shows the opposite: the estate tax motivates wealth holders to reduce savings and increase spending now rather than pass it to the next generation. This actually increases the consumption gap between the wealthy and the poor in America.
The bottom line is that both our economy and federal tax revenues would grow faster if the Death Tax was simply abolished.
According to a study by Stephen J. Entin, former deputy assistant secretary for economic policy at the Treasury Department, repealing the estate tax would actually increase federal revenue $89 billion through 2021 over the current estate tax revenue. How? Through increased economic output which spurs more tax revenue through payroll, income, and capital gains taxes without higher rates.
Ohio, Indiana and Tennessee have recently repealed this tax at the state level. And many countries that achieved higher scores than the United States on the latest version of Heritage Foundation’s Economic Freedom Index abolished their inheritance taxes, including Canada, Australia, New Zealand, Hong Kong and Singapore.
As the number one reason that many family farms, ranches and small businesses in American aren’t passed down to future generations, the cost of the Death Tax far exceeds any benefits it produces. It also piles on to the fiscal cliff we are headed for at the end of this year while causing businesses to sell assets and decrease their productivity.
The Death Tax is scheduled to spring back fully to life next year. Along with so many other tax hikes on capital gains, income, and dividends, this will have family-owned business and farms scrambling to just stay afloat, regardless of how flush or bereft of assets that they may be. We can’t let that happen.
Our tax code is too big, too complex and punishes those who work hard to build a family business. The Death Tax only adds insult to injury without helping reduce our nation’s $16 trillion debt. It’s time to bury it once and for all so Uncle Sam is no longer the intrusive shadow in the room when families grieve the loss of a father or mother who worked a lifetime to build their nest egg.