Obama and his liberal cronies in Congress are bringing back the Estate tax. This tax does most of it’s damage to family farms and businesses – it may very much threaten a key to Americas economic strength and what is certainly the last natural right that progressives have been unable to deface – the individual right to property.
As this post at Heritage.org states:
Estates that consist largely of family-owned businesses are the most vulnerable to the death tax. Family-owned businesses and the families that own and operate them are synonymous for purposes of the death tax. The value of the portion of a business owned by a deceased person, including the business’s assets, such as equipment and property, is included in their estate. The high value of these assets is the cause of the problem for family-owned businesses.
The business’s assets make the estate appear valuable on paper and can raise the value of the estate above the threshold over which the estate is subject to the death tax. Just because the business’s assets are worth enough to push the value of the estate above the threshold does not mean the family has enough cash available to pay the death tax.
First I ask, why tax this at all? Wouldn’t the IRS reap more benefits from the growth of the business as the heirs take over? If the dying owner is forced to hide assets (which he will) and preserve cash to prevent his children from taking the hit (which he will), the business will have far fewer resources before and after the hand-over with which to grow. How does this make sense?
As much as a 55% penalty will be assessed on private property, worth more than $1 Million that is passed down to heirs. At first glance, this looks like the usual progressive/socialist play to take from the wealthy and give to those they feel deserving. In reality, it destroys private companies and kills job creation.
The Heritage.org article continues:
The death tax slows economic growth, destroys jobs, and suppresses wages because it is a tax on capital and on entrepreneurship. Capital is any resource that individuals or businesses use to generate income. Like anything else, when the income accruing to capital is taxed, its price rises and less of it is purchased. Less capital means slower productivity growth, lower wages, and fewer jobs. As such, taxes on capital should be minimal or nonexistent. In fact, there is a general consensus among economists that there should be no taxes on capital. The death tax:
- (1) Discourages savings and investment. For those Americans who think that their estates may one day be subjected to the federal death tax, the tax sends a signal that it is better to consume today than invest and make more money in the future. Instead of putting their money in the hands of entrepreneurs or investing more in their own economic endeavors, Americans are encouraged to consume it now rather than pay taxes on it later.
- (2) Undermines job creation. Because the death tax discourages saving and investing, it also undermines job creation. Resources that otherwise would have been available for businesses to use to expand their operations and add new workers are consumed by people who deem it wiser to spend the money now than invest it knowing their inheritors will have to pay the death tax later. Furthermore, resources that businesses otherwise would have used to add jobs are diverted to protect families from the death tax.
- (3) Suppresses wages and productivity. Since the death tax lowers saving and investing, there are fewer resources available for businesses to purchase additional tools and equipment or replace old and worn-out pieces with new ones. That means less capital their workers can use, and therefore the workers’ productivity does not increase as much as it would have in the absence of the death tax. If the business cannot replace worn-out capital, the productivity of its workers declines. Wages are a function of a worker’s productivity, growing more slowly when productivity slows, and declining when productivity decreases.
And to see how this applies in the real world, a fox news blog post demonstrates the absolute destruction of capitalism that this new tax represents:
For generations, Anthony Timberlands, Inc., has been family-owned, but John Ed Anthony says if the estate tax rate is still 55 percent when he dies, his heirs will have to sell off the business. “What the estate tax will do to us at the time of my death is my son will have a visit from an IRS agent who will simply tell him, ‘Your $50 million dollar mill requires $20 million dollars,’” Anthony worries. He says the land where the company’s timber grows and its mills would have to be sold off in order to pay the tax. “When the estate tax strikes the industry in a small town,” Anthony warns, “[that impacts] everyone that’s in the community, everyone that is employed, all the peripheral businesses that make their money off the company.”
While a bi-partisan measure has been put forth, Harry Reid could kill the effort by simply not allowing it to see the Senate floor. Considering the current socialist-tint to all of dirty Harry’s moves, he may seek to solidify his base by sticking it to those wealthy business owners. Others in Congress are playing that card already as the blog post reports:
Senator Bernie Sanders, I-Vt., is floating an estate tax proposal that will bring in more revenue to government coffers than the Lincoln-Kyl measure. Sanders says, given the country’s current financial situation, this is no time to give “the rich” a break.
If privately-owned business are forced to pay these oppressive taxes, they will be forced to close down or sell-out. Imagine owning a family business worth $5.6 Million at the time of your death. If you hand it to your heirs, they get a $3.1 Million bill from the IRS. Do we want profitable enterprises to have to keep 50% of their assets in cash to handle this eventuality? No.
This level of taxation will force private companies to conserve cash they would have invested in expansion, purchases, job creation, growth. This is one more free-market killing idea from an administration and Congress bent on the death of capitalism. The only one this benefits is the government.
Socialism is the state ownership of means of production. Tax these entrepreneurs into a position where the IRS is owed their assets and well, you know.
Estate taxes are nothing more than a tax on assets simply because the owner is changing. It is a jobs killer, an economy killer, and it threatens the property rights of successful Americans. It’s time to repeal the death tax permanently.
Remember in November.