“At the death of our founder,” says W. J. Grundy, the former chairman of Jomac, Inc., a Pennsylvania manufacturer of protective gloves, “we spent over $3 million to redeem stock so estate taxes could be paid and control of the company could be maintained. This was $3 million not available for operations and the division in trouble was sold — reducing our employment by about 30 employees and our sales by about $5 million.”(Boston Globe, June 15, 2000) The Center for the Study of Taxation found that three out of four families faced with liquidating all or part of their business to pay the estate tax would have to cut their payroll in the process. Studies by the Institute for Policy Innovation (IPI) and Congress’s own Joint Economic Committee have found that the estate tax costs communities more in lost jobs and lower economic growth than it raises for the U.S. Treasury (William W, Beach, The Heritage Foundation). The very same thing can happen right here in the Valley.
The estate tax (or “death tax” as it has become known, though perhaps wrongly so) is a tax on inherited wealth and can amount to more than 50% of one’s estate. For a person dying during 2005, an estate with a value less than $1,500,000 would not pay a federal estate tax and most likely would not have to file a federal estate tax return. The applicable exclusion amount increases to $2,000,000 for decedents dying in the years 2006, 2007 and 2008. The amount increases to $3,500,000 for 2009. According to the Economic Growth and Tax Relief Reconciliation Act of 2001, the federal estate tax disappears for the year 2010, but the tax returns in 2011 at the 2001 level when the temporary repeal expires. As an extra tax applied to income that has already been drained by decades of other taxes, it is one of the most loathsome pieces of looting in the federal tax code. Put simply, it is double taxation on a working person’s lifetime wages. The federal government cashes in on a wealthy person’s death by looting his or her assets with a tax on a whole lifetime of work. Fortunately, opponents of the estate tax are struggling to make repeal permanent, but face stiff opposition from the usual suspects in the Senate. The House has already voted to permanently repeal it. A senate compromise could be a likely result, though an unsatisfactory one. Our own U. S. Senator John Sununu (R-NH) has committed to repealing the unfair practice of taxing an individual upon death by cosponsoring the “Jobs Protection and Estate Tax Reform Act of 2005,” legislation that permanently and immediately repeals the estate tax with the emphasis on immediately.
Now then, what possibly could be a rationale for a second tax at death? Perhaps the principle that the wealthy few, if they were not willing to bequeath their money to charity, should not be permitted to pass it all directly to their heirs. Or perhaps a related belief in human equality especially with respect to social, political, and economic rights and privileges (which is one definition of egalitarianism)? But it is submitted that egalitarianism is incompatible with freedom. Reality dictates in a free country that not everyone ends up with the same rewards, because not everyone is equally able, equally rational or equally hard working. With respect to earned wealth, justice dictates you deserve what you earn and should be able to use it as you see fit. With respect to inheritance, since the producer’s wealth belongs to him or her, they should have the right to will it to whomever they please.
These days, people consider it downright strange if anyone steps forward to defend a wealthy person. After all, the rich can take care of themselves. But this is short-sighted. The death tax rewards a “die-broke” ethic, whereby the wealthy spend down their wealth on over the top consumption. The tax discourages beneficial saving, and does not promote redistribution, equality of opportunity, or fundamental fairness (ironically all traditional liberal ideals). However, some of the worst damage is suffered by those with modest fortunes. These are the small-town businessmen like the aforementioned W. J. Grundy. There are any number of self -made people like Grundy in our country and in our Mount Washington Valley who work hard all their lives to build a successful family business–say a construction business, a farm, an eating establishment,or a small chain of dry cleaning stores –only to face the possibility of having their whole life’s work shredded and sold off after their death to pay estate taxes. If a farm owner’s land and property increases in value over the years because of the parallel real estate boom, his assets may increase the point where they qualify for the death tax unless he is fortunate enough to die in 2010. This creates an incentive to die in the year 2010 which, of course, is just plain crazy. These assets could have been actively invested in the economy, but once the government grabs it, the money is simply funneled down the drain of federal budgets and/or into the greedy and eager grasps of Washington bureaucrats. The fact is, more and more people can’t afford to pass on their farms or businesses. They sell out, discharging long-time employees. They do this not because they want to, but because they have no choice. And the implications can reverberate through an entire community……..or valley. Family businesses already carrying substantial debt (because of capital investment as just one example), when hit by this federal broadside, may have no option but to unload their business, often into the hands of a corporate enterprise with no ties to the local community.
Witty (and ultra-liberal) Congressman Barney Frank, (D-MA), fumes,”I don’t see why Bill Gates’ kids who are going to inherit Bill Gates’ money, not having done anything to earn it, shouldn’t have to pay some tax on that”(GrasstopsUSA.com). But one good paraphrasable response to that noxious comment is that some may not see why Barney Frank and the Federal bureaucratic monster from which he gains nourishment should want Bill Gates’ money, NOT HAVING DONE ANYTHING TO EARN IT. The fact is, Frank and his ilk are not entitled to one red cent.
If the Death Tax is so awful that it should be repealed in 2011, then it should be repealed immediately. It has been destroying businesses and ruining lives for four generations. Let us not continue this with our children. The Senate needs to repel this tax now.
“For every benefit you receive a tax is levied.” Ralph Waldo Emerson