SUMMER READING: DEATH TAX REPEAL

Last week, the Taxpayers Protection Alliance (TPA) began the Congressional recess Summer Reading series with an update on internet access taxes and what Congress (specifically the Senate) must do when they return from vacation and prevent tax increases on millions of Americans across the country. This week, the Death Tax takes center stage and there’s much work for Congress to do.  The good news is the momentum is building for some positive developments that could occur in a matter of weeks.

The first time the government imposed a form of the Death Tax was back in the late 1700s with the Stamp Act.  Then the tax was used to help finance the Civil War (as an inheritance tax).  And then again in 1916 when the Revenue Act became law (ushering in income tax), the estate tax came with it. Like before, when conflict arose in World War I (WWI), the tax became the vehicle for revenue generation. However unlike the previous two, the post –WWI Death tax was not repealed and is the foundation for what is in the current tax code. Today, per the fiscal cliff deal, the federal estate tax exemption is $5 million per person ($5.34 million in 2014), and the 40 percent tax rate applies to any amount over the exemption.

The Death Tax has been a lingering issue going back decades and no matter how many times there have been tweaks to the rate, it seems full repeal in recent memory has been out of reach. But now, recent movement in Congress appears to indicate that there is a very real chance to finally get rid of the Death Tax for good.

The time is right for Congress to take steps that would bring about permanent repeal of the Death Tax and there is legislation that many have said could very well get a vote in Congress this September. In the House of Representatives, Congressman Kevin Brady (R-Tex.) has sponsored H.R. 2429: The Death Tax Repeal Act of 2013 and the bill now has more than enough cosponsors needed to actually pass a bill in the chamber. Rep. Brady spoke about the crucial marker for his legislation:

“It’s official. A majority of the U.S. House stands for permanently repealing the terrible Death Tax. It continues to be the number one reason family-owned farms and businesses aren’t passed down to the next generation, and it’s time to bury it once and for all.”

A major hindrance for individuals and families, the Death Tax comes at such a terrible time for those who are hit. While people are in mourning, the government is literally picking the pockets of someone they have just lost. The impact of the confiscatory tax is not just hurting families, it is also harming economic growth. Americans for Tax Reform’s Ryan Ellis wrote in Forbes in June about momentum for repeal and discussed just how much damage the Death Tax is doing to the private sector, particularly as small businesses continue to struggle in the Obama economy:

Every year, successful job creators (who would much rather spend their money on hiring workers rather than lawyers) have to pay a kind of ransom to the death tax planning industry. Billions are spent on estate attorneys, actuaries, financial planners, charities, trusts, and other rent seekers who profit from the existence of even a very small federal death tax.

TPA has been involved in recent efforts to help bring awareness on the issue of repealing the Death Tax including our recent podcast, where Jim Martin of the 60 Plus Association was our featured guest and discussed his extensive work on repeal efforts and what is in store when Congress returns from their recess vacation. Also, TPA signed on to a coalition letter with more than 30 other organizations spearheaded by the Family Business Coalition laying out the case for the Death Tax repeal and specifically pointing out the negative impact it has:

It makes no sense to require grieving families to pay a confiscatory tax on their loved one’s nest egg. Often, this tax is paid by selling family assets like farms and businesses. Other times, employees of the family business must be laid off and payrolls slashed. No one should be punished for fulfilling the American dream. The negative effects of the death tax make permanent repeal the only solution for family businesses and farms.

There are not very many issues today where we see a majority of members of Congress ready to support legislation before it even hits the floor, but repealing the Death Tax appears to be one of those issues. The House has the chance to send a powerful message to taxpayers nationwide and show them that they understand just how damaging this tax has become for families and small business and that it must end. When you have ex-Presidents and their families like the Clintons shielding themselves from the Death Tax, the time has come for all Americans to be able to say they won’t pay this confiscatory tax. TPA will continue to call for a full repeal of the Death Tax and update our readers as action takes place in Congress.