Column: Should we be taxed to death — then taxed again for dying?

Jessica Reilly/Telegraph Herald Maureen Seevers, left, and her sister Megan Kregel examine a cow at Kregel Farms in Guttenberg, Iowa on Oct. 26. Small-business owners and owners of small farms like Kregel can lose everything to estate taxes.

A recent OpEd in your publication titled “Don’t repeal the estate tax and don’t believe the myths” (Ed Conant column, Nov. 12) continues the myopic and prejudiced view we are seeing daily from those who oppose repeal.

 

Despite its title, the piece perpetuates widely held misconceptions about the tax, and furthers a dangerous and economically unsound idea that success should be penalized. Let’s examine the author’s points, below.

 

The estate tax is double taxation: Contrary to what the author contends, this is not a myth. Many business owners are actually being subject to double taxation.

There are 5.75 million privately held employer firms in the country. A huge number spend money every year simply to mitigate the effects of the estate tax. This takes money away from growing businesses and creating jobs. When the owner dies, that tax becomes due. No goodwill is given to offset the years of taxes paid, nor the jobs that will be affected.

Here’s one example: Patriot Aluminum Products, in Louisa, Va., pays yearly income and payroll taxes, and supports the jobs and families of 60 employees. In addition to these taxes, for every dollar of investment in the company, the owner has to set aside an extra 40 cents to prepare for the estate tax.

Using life insurance, his current monthly premium is equivalent to, and prevents him from hiring, 1.5 new employees. This is just one small company out of millions.

 

The tax bill is a middle-class tax cut: Again, despite the author’s contention that only those with large estates will benefit, this tax bill does indeed represent a tax cut for middle class families. People in the $40,000-50,000 income range will see their income taxes go down by 7.7 percent. In addition, repealing the estate tax will also help those same people because wages will increase.

The Joint Economic Committee found that the estate tax has destroyed roughly $1.1 trillion in capital stock in the economy. Lost capital means fewer jobs and lower wages. Ending the estate tax would add $119 billion to GDP and boost workers’ income by $79 billion.

The estate tax forces heirs to sell small family farms and businesses to pay the tax.: The author suggests that only relatively few family farms will actually pay the tax, by citing a figure from the Tax Policy Center. That number however, is based on a model, not actual facts.

According to 2016 IRS data, nearly 700 family farms and more than 2,200 family-owned business paid the estate tax in 2016.

Since 1995, over 103,000 closely held businesses and roughly 36,000 farms have been forced to pay the estate tax simply because someone has died. This is hurting our economy and millions of jobs.

 

Estate tax repeal will boost the economy and help the middle class.: The repeal of the estate tax will create nearly 160,000 jobs by allowing more capital to be invested in each business.

According to the Tax Foundation, small businesses as a whole have been responsible for 60 to 80 percent of all net new jobs in the last decade. These small businesses represent the population that stands to lose the most. Should they find themselves in a situation where they owe more taxes than they can afford in the event of a family death, they will be faced with tough decisions.

Destroying jobs by targeting America’s main economic engine – small and often family-owned businesses – is bad economically.

The author’s use of the politics of envy underlines his view that anyone who is too successful (according to his judgment) should be taxed to death and then taxed again for dying.

We must make sure we protect these family businesses and avoid penalizing the success of these business owners. Death should not be a taxable event.

 

The writer is the president of the American Business Defense Council and a noted business leader and speaker.

 

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