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Hopefully Senator Thune can get the Senate to understand the Death Tax needs to go away

June 20, 2013

jcucurull_The_DeathEarlier this week Senator Thune (R-SD) and Representative Brady (R-TX) officially re-introduced the Death Tax Repeal Act of 2013 (S. 1183H.R. 2429). I am very happy to see a Senator from South Dakota taking a leadership position on such an important issue. Last December I posted about the immoral death tax after a Washington Post reporter called it the morally sanitized euphemism ”posthumous federal levy on accumulated wealth.” I’ll let my old post stand as-is to explain why I think the death tax is immoral. This post will briefly examine the economic reasons to repeal the death tax.

As someone who has worked in an Accounting office (working on books and tax returns for farmers and business owners) I can say the death tax DOES impact the economy. The 2013 exemption of $5,250,000 (IRS) sounds like a lot of ‘money’ to those that fight to keep the death tax. There are two reasons this is simply not true:

  1. The death tax is not just a tax upon “money”, it is a tax on transferred property. Five million dollars worth of land, equipment, and other physical assets is not as much as it sounds like. The monetary value for assets of a farmer, construction contractor, or  small manufacturer are likely to be far greater than five million dollars.
  2. The current tax system has caused most businesses to become credit heavy. Businesses are cash strapped. Any assets being passed on to the next generation from a business will not likely include liquid assets. Any person(s) inheriting such a business will be starting their business in debt to the IRS and even more credit-dependent than the previous generation.

These two reasons add up to one sad fact: the death tax kills many small businesses. Overcoming the effects of the death tax during a time of grief is very difficult to those inheriting business assets. This is not a theoretical situation as many death tax proponents state. Ask any good-sized accounting firm or business tax preparation firm about death taxes and they will be able to confirm it is not theoretical (but because they privacy serious they won’t be able to state cases without permission). Many accountants, tax preparers, and financial advisers try to get people to do something before death to prevent (or at least reduce) the effects of the death tax. But I would contend it should not be necessary to plan a fight against the IRS after death. The inheritor of a business should be able to continue operations as if nothing happened. Instead many of these businesses have some or all of their assets sold to pay the tax. This has the real world implication of people losing their jobs.

Whether it be for moral or economic reasons I believe the answer is the same: the death tax must be repealed. Hopefully Senator Thune will be able to gain enough support in the Senate to get this immoral and job-killing tax repealed. I guess we’ll just have to wait and see if Senator Baucus (D-MT) allows the bill out of the Senate Finance Committee. I wouldn’t hold out too much hope on Baucus though, as a Democrat politician he probably loves the ”posthumous federal levy on accumulated wealth.”

 

PS. Rep Noem, SD’s lone Representative, has become a co-sponsor on the House version of the bill. Being anti-economy, I would expect SD’s Senator Johnson to vote against this important bill (if Baucus allows it to reach the floor).

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