Idaho Examiner - Sen. Larry Craig News Releases

Friday, September 02, 2005

The Tax on Death

by Senator Larry Craig

Through the years, some pretty strange ideas have come out of Washington, D.C. Of all the bizarre things though, there has never been a tax on birthdays, thinning hair (thankfully!) or aching joints. To most people, taxes on such normal aspects of the aging process seem ridiculous. But until 2001, the federal government actually did levy a tax on part of the human life-cycle — death.

In 2001, Congress enacted a phase-out of the federal estate or “death” tax, with its complete repeal scheduled to occur for one year in 2010. While that legislation was a significant step in the right direction, the full economic potential of the repeal of the death tax will only be achieved when Congress makes it permanent.

That’s why, just before August recess, I, along with 16 of my colleagues in the Senate, supported a motion to proceed to final consideration of H.R. 8, the Death Tax Repeal Permanency Act of 2005. Shortly after the Senate reconvenes on September 6th, I will vote to bring debate to a close, and if successful, will vote to permanently repeal our country’s tax on death.

The death tax imposed under our current system is fundamentally unfair. A taxpayer’s death is the central fact that triggers this tax. There is no reasonable basis in philosophy, economics, or simple fairness for imposing a tax for no other reason than a person’s death, regardless of how much that person owned.

A cornerstone of American society is freedom — including economic freedom. Our forebears came to the United States seeking a better life, which included the freedom to work hard and pass on their life savings to benefit their families, not an overbearing government. A death tax is a detriment to freedom and counterproductive.

With such a burden, what incentive is there for people to work hard, create jobs, implement new ideas, save, and invest, if they know the government – not their family or other designated heirs, such as a church or favorite charity – will benefit from what they have accomplished? I believe people have a moral right to dispose of the fruits of their labors as they see fit, both in life and at its end.

Although the current exemption of an estate’s first $1.5 million is helpful, farmland or a small business that has been in the family for many years often has appreciated, on paper, to a much higher value. That value is locked up in the land and facilities and equipment. When the tax man comes and demands cash immediately, there is often no alternative to breaking up the farm or liquidating part or all of the business.

Unfortunately, the debate over repeal of the death tax often focuses only on the taxes that decedents’ estates actually pay, which have averaged only 1.3 percent of annual federal revenues over the past 10 years. This limited focus ignores the real costs this tax imposes on Americans, especially owners of small businesses and family farms, including: lifetime estate-planning costs, which surveys have found that an average family can spend up to $150,000 on such planning; substantial compliance costs at death with respect to attorneys, accountants, appraisers, and other experts; and deadweight costs, as the death tax discourages productive economic behavior, like saving, investing, and entrepreneurship.

Past politicians have sold the death tax — like other high taxes — on the basis of envy. I disagree with the premise that property should be confiscated by the government for no better reason than the fact that some people have more of it. Instead, our tax system, and indeed, our entire legal system, should be based upon equal opportunity, not the punishment of success or the forced redistribution of good fortune.

It is time for Congress to stop penalizing Americans’ efforts to prosper, to be enterprising, and to create wealth. It is time to make the repeal of the death tax permanent.

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